Qatar’s listed banks have witnessed growth in their asset base despite financial uncertainty due to COVID-19 pandemic, noted a report by released by KPMG on GCC banking sector.
KPMG has released the sixth edition of its Gulf Cooperation Council (GCC) listed banks’ results’ report.
Commenting on some of the significant trends concerning the GCC banking sector, Omar Mahmood (pictured), Head of Financial Services for KPMG in the Middle East and South Asia, and Partner at KPMG in Qatar, stated, “2020 was a pivotal year for banks in the GCC, as their digital transformation plans were accelerated, hybrid working was introduced and customer centricity remained at the forefront”.
“Despite the financial uncertainty arising from COVID-19, Qatar’s listed banks recoded the lowest profit decline amongst its regional peers. Increased loan provisioning as a result of liquidity and credit challenges being faced by borrowers reflected the more cautious approach taken by banks. The impact was partially offset by higher interest spreads and lower costs,” said the report.
“Banks saw a growth in their asset base, driven by the need to continue to support the country’s future ambitions, and costs continue to remain the lowest in the region, which reflects the relentless focus on efficiencies to help counter the impact of increased provisioning,” it noted.
Mahmood also commented on the numbers explaining how “the region posted a drop in profitability (31 percent) for the first time in a number of years and this was primarily as a result of a 59 percent increase in credit provisions.
Market sentiment also followed the fundamentals with a 10 percent drop in listed bank share prices too”. Talking about the Qatar banking sector specifically, Mahmood noted how “Qatar National Bank continues to maintain the top spot for the largest bank in the GCC in terms of assets and profits; banks in Qatar had the highest sector average for return on equity (13 percent); and banks in Qatar were the clear leaders amongst their regional peers in terms of their cost-to-income ratios (24 percent) demonstrating the tight cost control measures across the sector.”
Mahmood further commented that “although we saw a drop in a number of key financial metrics for listed banks in the GCC in 2020, banks also posted robust asset growth of 8.2 percent; they witnessed an increase in capital adequacy ratios to a sector average of 18.7 percent; and showed stability in costs with the cost-to-income ratio averaging 41 percent for the region in 2020.”
Overall, Mahmood noted how banks in the GCC are cautiously optimistic about the future.
“Banks have come through the past year as being more resilient, backed by strong government support, which positions them well for future growth, while also being very aware of the challenges that the current global economic conditions continue to pose for the regional banking sector”.
