By Satish Kanady
DOHA: Qatar’s top banker QNB is expected to be the biggest beneficiary of the government’s substantial spending on infrastructure projects, a report has revealed.
The expected increase in large infrastructure projects is likely to boost growth in QNB’s loan book in 2013, Global Investment House (GIH) 2013 Outlook on the Qatari Banking sector has revealed.
“We expect all banks to benefit from the increasing government focus and expenditure on infrastructure development in Qatar. However, QNB is expected to be the chief beneficiary of the strong thrust in government spending in 2013, as it has been the preferred banking partner of the Qatari government.
We expect QNB to register a loan growth of 18.7 percent YoY in 2013. It is expected to account for 59.1 percent of the incremental growth in banking sector lending in 2013,” the report said.
The GIH, which upgraded QNB to a ‘Strong Buy’ category, noted the bank’s high capital strength and low cost of funding enable it to outperform its peers and record sustainable growth. “The bank has a low loan to deposit ratio, which provides it the headroom to tap economic growth in Qatar. QNB has the second-highest ROE among its peers, after Doha Bank. QNB’s capital base is more than three times larger than that of its closest competitor”.
The report noted Qatari banks are exposed to lack of major trigger in the domestic market in 2013 as public sector remains the major driver of loan growth.
Hence, the acquisitions are likely to be the key agenda for Qatari banks to propel loan book growth in 2013. Qatari banks witnessed increase in M&A activities in 2012. Banks with a strong capital base have been the first movers in the M&A market.
Public sector lending has yielded strong growth in the loan books of the Qatari banks over the last three years, as the government-led infrastructure spending gained momentum. The loan book of the banking sector expanded at a compound annual growth (CAGR) of 26.3 percent during 2009-12 as lending to the government sector remained robust at CAGR of 45.8 percent during the same period.
“We expect loan growth to remain strong in 2013, given the government’s focus on investments in large-sized infrastructure projects,” GIH report said.
Qatari banks’ net loan growth in 2012 was strong at 25.9 y-o-Y to QR431.3bn, driven primarily by the public sector corporate lending. Financing of large capital investments for Qatar’s infrastructure development has been the key to the surge in overall lending activities.
GIH said it believes that in the run up to the 2022 World Cup, capital investment for Qatar’s infrastructure development will continue to drive lending growth.
“Qatar government plans to spend $138bn on infrastructure in 2011-16 in preparation to the world cup. We expect aggregate lending by the Qatari banks to increase in 2013, led by infrastructure development. Lending activities are expected to increase at a CAGR 13.2 percent during 2013-16, driven by double digit growth in lending to the public and real estate sectors”.
The Peninsula
