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KPMG report shows Qatar’s banking sector remains resilient

GCC listed banks results

The latest released of the ‘GCC listed banks results’ report

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KPMG’s recently released latest version of the ‘GCC listed banks results’ report has shown that the banking sector in Qatar saw positive results in 2017, with an average 5.0 percent growth in net profit, and 8.1 percent growth in total assets – the highest in the region.

The report , titled ‘Shifting Horizons’, analyzed the published results of listed banks across the region for the year ended 31 December 2017.

Speaking about the report, Omar Mahmood, head of Financial Services for KPMG in the Middle East & South Asia, and partner at KPMG in Qatar, commented, “Overall it has been a strong year for listed banks in Qatar. While profitability, assets and capital have all increased from the comparative year, banks in Qatar have also managed to reduce costs by 1.9 percent on average, resulting in a sector cost-to-income ratio of less than 30 percent, which is the lowest in the region. These positive report findings are particularly impressive, given the unique year for Qatar, both politically and economically, and continue to reflect the resilience of Qatar’s banking sector.”

Mahmood further commented that, “despite this success banks are still very well aware of the challenges that remain. Impairment charges, non-performing ratios and funding costs have all increased, while liquidity continues to be a key focus area. Banks are therefore reshaping strategies, targeting higher quality domestic assets and looking at diversified funding sources.”
In addition to this, the report outlines that share prices for listed banks in Qatar have declined year-on-year, as market sentiment has not reflected the strong fundamentals given the geo-political uncertainty in the region.

Qatar National Bank (QNB) remains the largest bank in the region, by assets and profitability, with a market share of 56.3 percent of total listed Qatar banking assets, demonstrating their dominant position in the sector across the region. Capital adequacy ratios In Qatar are also at higher levels in comparison to 2016, reflecting the specific capital raising activities undertaken by banks during the year to help support future growth.

Looking to the future, Mahmood added that, “the focus on innovation and efficiency will continue as banks in Qatar look to differentiate themselves in a competitive market, given the funding cost
pressures being faced, as well as the increasing regulatory requirements, such as Basel III and IFRS 9. We expect there to be continued control around the cost side of the business to ensure profitable growth remains and cost-to-income ratios are maintained at low levels.”

Additional findings in the report note that with the 2022 FIFA World Cup approaching, Qatari banks are likely to continue focusing on the local market, as opposed to looking overseas for growth. Furthermore, the report findings suggest that the regulator will continue to implement the Basel III capital requirements, with additional domestic systemically important banks and counter cyclical buffer requirements to be gradually phased in, resulting in higher capital adequacy requirements for banks to meet.

The report titled ‘GCC listed banks results: Shifting horizons’ (available here: gcc-listed-banks-results ), analyses the results of selected listed banks in the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the Kingdom of Saudi Arabia, the State of Qatar and the United Arab Emirates. It summarizes bank’s results against selected key performance indicators for the year ending 31 December 2017 and compares these with the same information for the year ending 31 December 2016.

The report findings highlight that the GCC banking sector remains relatively resilient amidst regional and global political and economic challenges, although they have not seen the double-digit growth rates seen in previous years. Overall, net profits have increased year-on-year by 6.7 percent, in comparison to last year’s decline, as a result of larger GCC economies. The region’s banking sector continues to focus on cost reductions and operating efficiency initiatives, largely driven by innovation and technology, and as evidenced by declining cost-to-income ratios.

©2018 KPMG LLC, a limited liability company registered with Qatar Financial Centre Authority (QFCA), State of Qatar and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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