By Pratap John/Chief Business Reporter
The asset base of local banks has seen a QR78bn increase (9%) in nine months up to September on the back of higher lending, a KPMG report has shown.
In the first three quarters of this year, the banks’ lending portfolio saw a QR59.1bn increase in December 2013, KPMG said.
Furthermore, Islamic banks continue to experience higher asset growth rates than their conventional counterparts. This is predominantly a result of increased public spending on the back of a gradual acceleration of infrastructure projects. Islamic lenders also continue to experience higher asset growth rates than their conventional counterparts.
According to KPMG, there had been a “positive story” for listed banks in Qatar for the first nine months of 2014 with robust asset growth, lower impairment charges, stronger asset quality, higher profitability; all coupled with capital adequacy ratios that remain above the QCB minimum requirements.
Omar Mahmood, partner, KPMG Qatar and head (financial services) said, “Combined net profitability for all banks increased by 12.2% from the nine month period that ended on September 30, 2013, predominantly driven by higher net interest income. Strong economic growth and increased market activity have been the main drivers behind these positive set of results.
“For the first time in recent periods, market sentiment appears to be more correlated with entity-specific fundamentals with bank share prices, for all but one bank, exhibiting a positive trend from the prior period,” Mahmood said.
Islamic banks’ share prices have on average jumped by 69%, whereas their conventional peers on average increased by 12%.
Deposits are up, with a healthy growth of 7.7%, up by QR46.4bn from end-December 2013.
Mahmood said the increase mainly came from population growth, increased marketing and attractive pricing to absorb liquidity in the market.
“This will certainly be an area of continued focus for banks in Qatar given the recently issued Qatar Central Bank regulations on the ‘loan to deposit’ ratio which will force banks to actively look to increase their customer deposit base, and if not, be faced with restricting lending activities.”
Despite concerns over recent oil price declines and increasing regulatory driven capital requirements (mainly for ‘domestic systemically important banks’), the overall banking sector outlook remains positive, the report said.
“Bank lending and investment activity, both domestic and international, are expected to rise on the back of further acceleration of infrastructure projects ahead of the 2022 FIFA World Cup and increased public spending underpinned by high fiscal surpluses,” KPMG said.
