As the 2022 FIFA World Cup approaches, Qatari banks will keep primary focus on the local market, as opposed to looking overseas for growth, KPMG said in its recent report on GCC banking sector entitled ‘Shifting Horizons’.

Given the implementation of IFRS 9, banks will look to higher credit quality of assets for financing and investment opportunities.

It said the focus on innovation and efficiency will continue as banks look to differentiate themselves in a competitive market given the income pressures being faced and increasing regulatory requirements (such as Basel III and IFRS 9).

“We expect there to be continued control around the cost side of the business to ensure profitable growth remains and cost-to-income ratios (CIRs) are maintained at low levels,” KPMG said.

In its outlook, KPMG said banks will continue to look to access the capital markets for funding through the Euro medium-term note and sukuk issuances, to help support growth.

The regulator will continue to implement the Basel II capital requirements with additional Domestic–Systemically Important Banks (D-SIB) and counter cyclical buffer (CCB) requirements to be gradually phased in, resulting in higher capital adequacy requirements for banks to meet.

The report also noted listed banks in Qatar continue to have some of the lowest cost-to-income ratios (CIR) in the region.

At 29.5%, Qatar’s listed banks have the “lowest” CIR, on average across the GCC, reflecting “cost consciousness” across the sector and the country as a whole, KPMG said in its ‘GCC Listed Banks Results’ report.

All except two banks, both in the Islamic sector, reported a decline in their CIRs, which KPMG noted, “helped overall average dip” below 30% for the first time in a number of years.

Banks have continued to invest in short and long-term cost-saving initiatives.

Overall profitability for listed Qatari banks has increased year-on-year by 5%. All banks, except for two, reported an increase in net profit from 2016, with conventional banks outperforming their Islamic counterparts.

This increase can be primarily attributed to higher net interest income and a decrease in costs, which banks continue to focus on and maintain at low levels.

Capital Adequacy Ratios (CARs), for all except two banks are at higher levels when compared with 2016, reflecting the “conservative approach” to business during the year, coupled with the specific capital-raising activities undertaken.

In addition, the regulatory capital adequacy requirements have been, and continue to, increase with the gradual phasing in of Basel III regulations, with the minimum capital adequacy regulatory requirement expected to reach 17% for some banks by 2018.

The report said the Qatar Central Bank takes a “proactive” approach to regulating banks in Qatar. It has issued Basel III regulations for all banks, which have been applied in a phased manner, and has implemented numerous regulatory requirements that have been applied in more developed financial markets, covering areas such as stress testing, capital planning, liquidity management and recovery and resolution planning.

Currently, 18 banks operate under the QCB, of which 11 are national banks. Four of these are Islamic banks.

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