Qatar’s listed banks had the "highest sector average" for return on equity of 13.7% compared with a GCC average of 11.3% in 2021, KPMG said in a report.
In its report on GCC banking sector in 2021, KPMG said QNB continues to maintain the top spot for the largest bank in the GCC in terms of assets.
Qatar’s listed banks were the clear leaders amongst their GCC peers in terms of cost-to-income ratios (23.3%), versus a GCC average of 41.1%, demonstrating the success of tight cost control measures across the sector.
Non-performing loan coverage ratio of Qatar banks stood at 92.0% versus a GCC average of 66%, KPMG said.
However, KPMG noted Qatar was also the only GCC country to report an increase (19.2%) in the average net provision charge, versus a GCC average decline of 14.5%, “reflecting a continued cautious approach amidst a challenging credit environment.”
On some of the significant trends concerning the GCC banking sector, Omar Mahmood, head (Financial Services for KPMG in the Middle East and South Asia) and partner at KPMG in Qatar, stated, “2021 was a redefining year for banks in the GCC. The banks emerged more resilient from an unprecedented year impacted by Covid-19, witnessing improved profitability, a greater focus on digital transformation, ESG gaining prominence, and agile working becoming the norm”.
Key highlights from the report are a 35.8% increase in profitability, after a double-digit dip in 2020, which was primarily due to reduced cost of funds and lower loans provisioning by 14.5%.
Market sentiment also followed the fundamentals with a 36.6% rise in listed bank share prices. There was a noted improvement across numerous key financial metrics with a robust asset growth of 6.4%, ROE and ROA improving by 0.3% and 2.8% respectively, an increase in the capital adequacy ratios to a sector average of 19%, and a cost reduction in the cost-to-income ratio by 0.3%.
The report also presents a forward looking view of “a new reality” being established with six key themes for the GCC banking sector. Lending is expected to be cautious and selective as banks focus on quality while effectively managing their NPLs and loan impairment across all sectors of the economy.
Costs are expected to decline further as the effects of digital investment and consolidation come to fruition. Digital transformation will most likely continue as technology and innovation become business as usual and as banks embrace disruptive trends.
ESG is likely to remain a front-and-centre focus for investors, regulators, banks, and customers. The rising interest rate environment and effective NPL management is likely to help drive profitability and growth.
“Lastly, we see a robust economic environment, fuelled by higher oil prices, that could help to stabilise any potential credit volatility and continue to support a resilient GCC banking sector,” KPMG said.
Overall, GCC banks “emerged more resilient despite a challenging year”, the report said.
Mahmood noted, “GCC banks have rebounded after a difficult year courtesy of proactive balance sheet management backed by effective government support. This had cast a strong foundation for future growth while also being prepared to withstand the current and continued challenges and threats posed by the global economic conditions”.
In its report on GCC banking sector in 2021, KPMG said QNB continues to maintain the top spot for the largest bank in the GCC in terms of assets.
Qatar’s listed banks were the clear leaders amongst their GCC peers in terms of cost-to-income ratios (23.3%), versus a GCC average of 41.1%, demonstrating the success of tight cost control measures across the sector.
Non-performing loan coverage ratio of Qatar banks stood at 92.0% versus a GCC average of 66%, KPMG said.
However, KPMG noted Qatar was also the only GCC country to report an increase (19.2%) in the average net provision charge, versus a GCC average decline of 14.5%, “reflecting a continued cautious approach amidst a challenging credit environment.”
On some of the significant trends concerning the GCC banking sector, Omar Mahmood, head (Financial Services for KPMG in the Middle East and South Asia) and partner at KPMG in Qatar, stated, “2021 was a redefining year for banks in the GCC. The banks emerged more resilient from an unprecedented year impacted by Covid-19, witnessing improved profitability, a greater focus on digital transformation, ESG gaining prominence, and agile working becoming the norm”.
Key highlights from the report are a 35.8% increase in profitability, after a double-digit dip in 2020, which was primarily due to reduced cost of funds and lower loans provisioning by 14.5%.
Market sentiment also followed the fundamentals with a 36.6% rise in listed bank share prices. There was a noted improvement across numerous key financial metrics with a robust asset growth of 6.4%, ROE and ROA improving by 0.3% and 2.8% respectively, an increase in the capital adequacy ratios to a sector average of 19%, and a cost reduction in the cost-to-income ratio by 0.3%.
The report also presents a forward looking view of “a new reality” being established with six key themes for the GCC banking sector. Lending is expected to be cautious and selective as banks focus on quality while effectively managing their NPLs and loan impairment across all sectors of the economy.
Costs are expected to decline further as the effects of digital investment and consolidation come to fruition. Digital transformation will most likely continue as technology and innovation become business as usual and as banks embrace disruptive trends.
ESG is likely to remain a front-and-centre focus for investors, regulators, banks, and customers. The rising interest rate environment and effective NPL management is likely to help drive profitability and growth.
“Lastly, we see a robust economic environment, fuelled by higher oil prices, that could help to stabilise any potential credit volatility and continue to support a resilient GCC banking sector,” KPMG said.
Overall, GCC banks “emerged more resilient despite a challenging year”, the report said.
Mahmood noted, “GCC banks have rebounded after a difficult year courtesy of proactive balance sheet management backed by effective government support. This had cast a strong foundation for future growth while also being prepared to withstand the current and continued challenges and threats posed by the global economic conditions”.