Qatari banks’ return on average assets (RoAA) improved marginally to 1.59% in 2019 from 1.56% in 2018 in tandem with the growth in net income, according to the Qatar Central Bank.
Moreover, the “positive” growth in net interest income resulted in an increase in net interest margin (NIM) from 1.83% to 1.87%.
The growth in interest earning asset, in particular the higher growth in the private sector credit, enabled the banking sector to register “significant” growth in interest income, the banking regulator noted.
All other major components of income also registered growth, which facilitated the banking sector to post “significant” growth in total income, the QCB said in its 11th Financial Stability Review.
Interest income, which holds more than 86% of the total income grew by 11.6%, while income from fees and commissions also increased at the same magnitude.
Along with increase in interest income, interest expenses also increased, but at higher rate.
“Banks have resorted to more of external funding on account of lower growth in domestic deposits, which might have been one of the reasons for this higher growth,” the QCB said.
However, it said the net interest income recorded a growth of around 7.6% during the year. The decline in administrative expenses though marginal helped the banking sector to “cover” this increase in interest expense to some extent.
At the same time, expenses on the provision made for loan increased, partially due to the IFRS9 implementation.
Accordingly, total expenses grew by 13.3% higher than that of the
growth in total income. Thus, the net income grew by 7% lower than the growth recorded during 2018.
The share of interest/return income for the Islamic banks groups continue to “remain high” though it fell marginally in 2019.
In case of the conventional banks, concentration of income from interest increased while income from commissions/fees reduced during the year.
The foreign banks continue to have more diversified income flow where as their income from interest is around 63.3%, while the banking sector overall has a share of 86.5% during 2019.
With increase in interest expenses, its share increased by 1.2% points. All the banks groups share of interest expenses in the overall expenses increased whereas foreign banks recorded the maximum increase in the interest expenses, the QCB said.
