DOHA: With the new accounting norms kicking in, Qatar banks are forced to set aside additional reserve. Based on the IFRS9 standards, created on the aftermath of 2008 financial crisis, the listed banks in Qatar alone will have to create a combined additional buffer of QR8.5bn, according to an estimate by KPMG Qatar.
“The implementation in the new accounting standards (IFRS9) on January 1, 2018, will result in higher provisioning by financial institutions based on the new expected credit loss approach. The estimated expected credit loss charge on loans and advances for listed banks as a result of IFRS9 implementation will range from QR0.2bn to QR2.3bn,” Omar Mahmood (pictured), the Qatar-based Partner and Head of Financial Services for KPMG in the Middle East and South-Asia told The Peninsula in an interview.
Qatar banks are however, well prepared for the expected impacts. The retained earnings of the listed banks are currently standing at QR47bn. Then they have the existing risk reserve of QR16.5bn, which would together come around QR64bn. These numbers clearly show Qatar banks have got adequate buffers to cope for the IFRS9 charge.
The expected IFRS9 charge in 2018 for the smaller lenders is around QR200m and major lenders like QNB is QR2.4bn. These figures are as per the December 2017 disclosures. The exact figures will come out when the banks hit the book in March.
The new regulations are essentially increasing provisioning and it varies from bank to bank. There is a 40 percent increase in the provisioning rate for Qatar’s listed banks. 40 percent increase is quite reasonable compared to numbers from developed markets.
KPMG’s analysis has shown that Qatar’s listed banks have enjoyed a healthy financial year in 2017, reporting on average, a 6.5 percent profit increase year-on-year. Cost-to-income ratios of all banks, except two, have reduced year-on-year, reflecting the continued focus on efficiencies to improve net profits.
Total deposits for listed banks grew by 12 percent Y-o-Y, 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.
“As well as increases in profits and drops to cost-to-income ratios, we have seen healthy asset growth from Qatar’s banks Y-o-Y at close 10 percent. This has largely been driven by increased lending and a significant 20 percent Y-o-Y increase in bond/sukuk investments. Despite regional economic and political uncertainty, it is clear that Qatar’s banks are taking the right steps to ensure sustainable growth,” Omar said.
