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Qnb group qatar’s banking system is robust with good asset quality
QNB Economicseconomics@qnb.com.qa20 May 20131Qatar’s Banking System is Robust with Good AssetQualityThe banking system in Qatar has been robust,with a compounded annual growth rate (CAGR)of 20% in assets from March 2008 - March 2012and another 20% in the year to March 2013.Higher energy prices and increased gasproduction have funded a large public spendingprogram, which has driven credit growth andresulted in overall asset gains, according to QNBGroup’s soon to be published report, QatarEconomic Insight 2013.Total banking assets to GDP increased from 97%in 2008 to 117% in 2012. This is higher than theGCC average of 93%, but still comparativelylower than some major economies such asGermany and China. Qatar’s banking sectorasset quality remains stronger than in manycountries in the world, with non-performing loans(NPL) estimated at just 2% of total loans in 2012.Qatar’s banking system also has soundcapitalisation, with a capital adequacy ratio of19%, far above Basel requirements.Total Banking Assets to GDP (2012)(Total Assets as % of GDP)Saudi93%64%Oman72%86%Kuwait100%Qatar117%UAE136%China261%Germany309%GCCGCCUSSource: Central banks and QNB Group analysisThe main driver for Qatar’s banking growth wasdomestic assets, which in turn was driven by 27%growth in credit (accounts for 71% of domesticassets). Conventional banks account for thelargest share of assets (72%) and, therefore,were largely responsible for the strong growthwith their balance sheets expanding by 18% in2012.Total Banking Sector Assets(US$bn, % share and CAGR shown)17%March 201080%13469%20%March 201316%23382%18%March 2012March 200919380%16%March 201111115920%73%19March 20089471%25%DomesticForeignSource: Central banks and QNB Group analysisThe top five banks in Qatar accounted for 77% oftotal banking sectors assets in March 2013. QNBis the largest bank in Qatar and the MENA regionwith total assets of US$104.4bn as at March2013. QNB has also put Qatar on the globalbanking landscape by emerging as “TheStrongest Bank” in the world for 2012 as per therecently released survey by Bloomberg Markets.The sector’s overall credit facilities increased by25% in the year to March 2013 to US$142bn,compared to March 2012. Credit facilities to thepublic sector accounted for the largest portion(40%) of overall loans as at March 2013The public sector was also the key growth driverfor overall gains in banking sector deposits.Deposits from the public sector rose sharply by83% year-on-year as at March 2013.Although the rapidly increasing public sectordeposits form a stable source of funding for theQatari banks, they have also been widening their
QNB Economicseconomics@qnb.com.qa2funding options in recent years. Banks have beentapping into international bond markets and in2012 issued bonds to the tune of US$4.5bn.Qatari banks have high credit ratings, along witha record of generating consistently strong growthin their operations and financial results. This hasallowed them to successfully access internationaldebt markets and find funding options atcompetitive rates.The net profit of Qatari banks increased by 7.5%in 2012 to reach US$4.4bn. The return onaverage equity (ROAE) stood at 17.5%, while thereturn on average assets was at 2.7%. Higherlending, a low cost base and low provisioningrequirements have supported the banks overallprofitability.We expect Qatar’s banking sector to maintain itsprofitability in 2013-14. It is expected to continueon its strong growth trajectory also taking intoaccount further global expansion by local banks.Qatari banks have been swiftly expanding theirglobal footprint in recent years. Most local banksalready have an international presence throughbranches and offices. In addition, a number ofQatari banks have acquired a stake in financialinstitutions in the MENA region and in otherselect markets. Current plans will see continuedexpansion by local banks. QNB has the largestinternational network among MENA banks, with apresence in 25 countries. Other local banks arealso actively seeking international growthopportunities. Qatari banks will continue to look atinternational expansion in 2013-14 as globalbanking asset prices remain attractive and asQatar rapidly expands its internationalinvestments, providing related banking needs andopportunities.** Ends **