DOHA: Qatari banks are likely to witness poor earnings growth as their net interest margins (NIMs) continue to face pressure with the cost of funds, meaning interest rate paid by financial institutions for the funds that they deploy in their businesses, edging upwards in 2013 fourth quarter. Higher provisioning related to real estate exposure is also likely to continue in the quarter.
SICO Investment Bank’s quarterly result preview of GCC equities noted yesterday the bellwether Industries Qatar (IQ) is expected to deliver flat year-on-year performance mainly due to a weak fertilizer prices.
Commercial Bank of Qatar (CBQ) is expected to see higher provisioning charges due to rise in real-estate impaired loans. Doha Bank’s higher net interest income y-o-y is expected to drive earnings. Qatar Islamic Bank (QIB) is likely to see higher provisioning charges because of rise in real-estate impaired loans. QNB’s strong balance sheet growth will continue, the research note said.
The IQ’s revenue is projected to grow 12 percent y-o-y and 11 percent on q-o-q. Net profit is projected to increase seven percent y-o-y and 8 percent q-o-q. Weaker urea prices are to offset positive impact from rising petrochemical prices.
GCC listed companies that covered by the Investment Bank are expected to report 22 percent y-o-y earnings growth, while remaining flat on a q-o-q basis.
SICO expect Banks in Saudi Arabia to continue to report strong double digit y-o-y balance sheet growth. The impact on earnings due to expected higher provisioning in 4Q13 should be offset by NIM expansion related to their focus on retail operations. UAE banks should witness modest lending growth due to limited corporate borrowing, while provisioning is expected to remain at elevated levels.
On the petrochemical companies, covered by SICO, the 4Q13 earnings forecasts reflect a consolidated increase of 11 percent q-o-q and 8 percent y-o-y, respectively. The sequential earnings growth is supported by higher product prices across a broad based petrochemical products range, partially offset by weak fertilizer prices.
INVEST AD, the Abu Dhabi based Investment Company in its Markets Outlook released yesterday noted the fourth-quarter earnings results are likely to be the main drivers of performance of the Gulf markets in the coming weeks, with dividend pay-outs also important given the predominance of retail investors in the region. Investors will also be closely watching the announcement of federal budgets for 2014. Qatar’s recent announcement of a series of huge infrastructure projects is an early sign of the likely revival of projects in the country.
“The pace of the US Federal Reserve’s “tapering” in the coming year is likely o impact emerging market and frontier market sentiment, but investors in the Gulf are in a cautiously optimistic mode for now,” INVEST AD said.