* The role played by Qatar Central Bank was vital in maintaining a robust banking ecosystem, PwC said in its ‘2020 Qatar Banking Sector Report’
Qatari banks have displayed resilience despite volatility caused by the pandemic and a drop in oil prices in the region, PwC has said in a report.
Through increased public and private sector collaboration, coupled with a drive to diversify revenue streams and attract new investors, Qatar's institutions swiftly mitigated the risks of Covid-19 induced volatility.
The role played by the Qatar Central Bank (QCB) was vital in maintaining a robust banking ecosystem, PwC said in its ‘2020 Qatar Banking Sector Report’.
Measures introduced by QCB significantly moderated economic volatility and laid the groundwork for a post-pandemic recovery across the private sector, it said.
The QCB played a vital role in the ecosystem, by combining supervision activities with a series of measures significantly mitigating economic volatility and assisting recovery across the private sector.
For example, QCB offered repurchase facilities (Repo) at a zero interest, which helped banks to receive liquidity and reduce the interest/return rate for affected sectors, ultimately boosting their ability to repay the loans in the long run.
The eight listed commercial banks have proactively responded to the QCB’s support policies as well as revised their financial models based on emerging macro trends. Macro trends are reflected into the financial aggregated data reported by the eight listed commercial banks, which show the resilience of the sector through volatility.
“FY2020 is marked by growth of assets, streamlined non-interest costs as well as an overall decreased profitability level,” PwC said.
In FY 2020, the aggregated balance sheet of the eight listed commercial banks regulated by the QCB grew by 7.3% (assets), 7.8% (liabilities) and 3.0% (equity) between FY 2020 and FY 2019, the report noted.
The aggregated total assets of the eight listed commercial banks hit QR1.74tn as of 31 December 2020, reflected in the 7% growth of total aggregated loan and advances which hit QR1.2tn as of 31 December 2020.
“This data proves once again that the lending activity remains healthy and in expansion, driven by diversified sources of funding. The increase in the lending activities through loans and advances is a sign of confidence in businesses and the economy, with the eight listed commercial banks maintaining a constant lending strategy also during a volatile market,” PwC said.
On the other hand, volatility had an impact on profitability, showed by a decline of the aggregated profit of the eight commercial banks from a total of QR24.65bn to QR21.59bn (-12.43%), compared with FY 2019.
The difference is mainly driven by a drop of revenue income (QR-12.7bn), 86.7% of which is contributed by a decline of interest income (QR-11bn).
Reasons for this income drop, PwC noted, are also linked to the aggregated impairment allowance (stage 1,2,3 combined) of the eight listed commercial banks, which increased by 17.3% (FY2019 vs FY2020), showing the risk of credit loss has increased over the last financial year.
A further breakdown of the aggregated impairment allowance of the eight listed banks by sectors, as reported on the financial statements (large corporates, consumer/retail, SMEs, real estate mortgage) shows that impairment provision for SMEs improved (stage 1,2,3 combined decreased -11.3%) compared to the figures in FY 2019, proving them to be resilient in a volatile environment.
Meanwhile, the aggregated impairment provisions of the eight commercial listed banks for the large corporates category grew in FY 2020 to reach QR24.2bn (+22,5%) in stage 1,2,3, compared to FY 2019.
Also, the real estate mortgage sector saw an increase in impairment provisions by +74.0% (stage 1,2,3 combined) while consumer/retail’s impairments grew +10.3% (stage 1,2,3 combined).
“Overall, the increase in impairment provision as a natural consequence of the volatility experienced in FY 2020, and the outlook for the 2021 performance, remains positive,” PwC said.
Burak Zatiturk, PwC Qatar Financial Services leader, said, “Measures introduced by QCB provided much needed liquidity amid times of increased volatility. During 2020, the expansionary lending activity of listed banks is testament to market confidence in the business environment and the Qatari economy.
“With banks maintaining a consistent lending strategy despite a volatile market in 2020, we can see signs of mid-to-long-term optimism for Qatar’s resilience, the evolution of its robust financial industry and GDP growth. In the near-term, we will see banks continuing to focus efforts on transformation, through the adoption of digital technologies, such as ‘RegTech’ in order to future-proof their operating models.”
Through increased public and private sector collaboration, coupled with a drive to diversify revenue streams and attract new investors, Qatar's institutions swiftly mitigated the risks of Covid-19 induced volatility.
The role played by the Qatar Central Bank (QCB) was vital in maintaining a robust banking ecosystem, PwC said in its ‘2020 Qatar Banking Sector Report’.
Measures introduced by QCB significantly moderated economic volatility and laid the groundwork for a post-pandemic recovery across the private sector, it said.
The QCB played a vital role in the ecosystem, by combining supervision activities with a series of measures significantly mitigating economic volatility and assisting recovery across the private sector.
For example, QCB offered repurchase facilities (Repo) at a zero interest, which helped banks to receive liquidity and reduce the interest/return rate for affected sectors, ultimately boosting their ability to repay the loans in the long run.
The eight listed commercial banks have proactively responded to the QCB’s support policies as well as revised their financial models based on emerging macro trends. Macro trends are reflected into the financial aggregated data reported by the eight listed commercial banks, which show the resilience of the sector through volatility.
“FY2020 is marked by growth of assets, streamlined non-interest costs as well as an overall decreased profitability level,” PwC said.
In FY 2020, the aggregated balance sheet of the eight listed commercial banks regulated by the QCB grew by 7.3% (assets), 7.8% (liabilities) and 3.0% (equity) between FY 2020 and FY 2019, the report noted.
The aggregated total assets of the eight listed commercial banks hit QR1.74tn as of 31 December 2020, reflected in the 7% growth of total aggregated loan and advances which hit QR1.2tn as of 31 December 2020.
“This data proves once again that the lending activity remains healthy and in expansion, driven by diversified sources of funding. The increase in the lending activities through loans and advances is a sign of confidence in businesses and the economy, with the eight listed commercial banks maintaining a constant lending strategy also during a volatile market,” PwC said.
On the other hand, volatility had an impact on profitability, showed by a decline of the aggregated profit of the eight commercial banks from a total of QR24.65bn to QR21.59bn (-12.43%), compared with FY 2019.
The difference is mainly driven by a drop of revenue income (QR-12.7bn), 86.7% of which is contributed by a decline of interest income (QR-11bn).
Reasons for this income drop, PwC noted, are also linked to the aggregated impairment allowance (stage 1,2,3 combined) of the eight listed commercial banks, which increased by 17.3% (FY2019 vs FY2020), showing the risk of credit loss has increased over the last financial year.
A further breakdown of the aggregated impairment allowance of the eight listed banks by sectors, as reported on the financial statements (large corporates, consumer/retail, SMEs, real estate mortgage) shows that impairment provision for SMEs improved (stage 1,2,3 combined decreased -11.3%) compared to the figures in FY 2019, proving them to be resilient in a volatile environment.
Meanwhile, the aggregated impairment provisions of the eight commercial listed banks for the large corporates category grew in FY 2020 to reach QR24.2bn (+22,5%) in stage 1,2,3, compared to FY 2019.
Also, the real estate mortgage sector saw an increase in impairment provisions by +74.0% (stage 1,2,3 combined) while consumer/retail’s impairments grew +10.3% (stage 1,2,3 combined).
“Overall, the increase in impairment provision as a natural consequence of the volatility experienced in FY 2020, and the outlook for the 2021 performance, remains positive,” PwC said.
Burak Zatiturk, PwC Qatar Financial Services leader, said, “Measures introduced by QCB provided much needed liquidity amid times of increased volatility. During 2020, the expansionary lending activity of listed banks is testament to market confidence in the business environment and the Qatari economy.
“With banks maintaining a consistent lending strategy despite a volatile market in 2020, we can see signs of mid-to-long-term optimism for Qatar’s resilience, the evolution of its robust financial industry and GDP growth. In the near-term, we will see banks continuing to focus efforts on transformation, through the adoption of digital technologies, such as ‘RegTech’ in order to future-proof their operating models.”