KPMG report: Qatar’s listed banks continue to thrive, seeing an average 6.5 percent increase in profit in FY 2017.
Recent KPMG analysis has shown that Qatar’s listed banks have enjoyed a healthy financial year 2017, reporting on average, a 6.5 percent profit increase year-on-year (YOY). Cost-to-income ratios of all-bar-two banks have reduced year-on-year, reflecting the continued focus on efficiencies to improve net profits. Total deposits for listed banks grew by 12% YOY, a demonstration of the positive way in which Qatar’s banks have taken steps to manage the impacts of withdrawals, as a result of the recent blockade.
On the findings, Qatar-based Partner and Head of Financial Services for KPMG in the Middle East and South Asia, Omar Mahmood, said: “As well as increases in profits and drops to cost-to-income ratios, we have seen healthy asset growth from Qatar’s banks YOY at close to 10 percent. This has largely been driven by increased lending (10 percent YOY) and a significant increase in bond/sukuk investments (20 percent YOY). Despite regional economic and political uncertainty, it is clear that Qatar’s banks are taking the right steps to ensure sustainable growth and returns.”
Despite the positive results, most bank’s share prices have declined from FY2016. On this Mahmood continued: “We have seen a pattern of falling share-prices across most sectors of the economy, however this appears to be largely driven by sentiment as opposed to fundamental results, which are on the whole, positive. Overall, banks’ share prices performed better than non-banking listed entities, which is encouraging for the sector”.
The implementation of the new International Financial Reporting Standard 9 – Financial Instruments (IFRS9) on 1 January 2018, will result in higher provisioning by financial institutions based on the new expected credit loss approach, and will provide investors with useful information on changes in credit risk exposure. The estimated expected credit loss charge on loans and advances for listed banks as a result of IFRS 9 implementation ranges from QAR 0.2bn to QAR 2.3bn. Qatar’s banks are however well prepared for the expected impacts, Mahmood continued: “all listed banks have more than adequate retained earnings and risk reserve balances to absorb the expected credit loss charge, and they do not expect a significant impact on capital adequacy as a result of adoption of IFRS 9 on 1 January 2018. This is also evident from the fact that every bank in Qatar has proposed dividends which are in line or higher than what was paid to shareholders for FY 2016”