Doha: Qatari Islamic banks are likely to see their market share grow further in 2021, particularly if the proposed merger of Masraf Al Rayan and Al Khalij Commercial Bank is completed, said Fitch Ratings in a report released yesterday. Islamic banks continued to grow faster than conventional banks in 2020 (10.9 percent versus 6.8 percent), reaching 24.2 percent of sector assets at year-end.
“The Islamic banking market share is likely to grow further, particularly if the proposed merger of Masraf Al Rayan and Al Khalij Commercial Bank is completed,” said Fitch Ratings.
According to the report, profitability will remain under pressure from lower profit rates, lower business volumes, and elevated financing impairment charges. Asset quality metrics will also weaken once financing deferral programmes and regulatory flexibility for banks to recognise impairments elapse. Liquidity is expected to remain adequate and likely to benefit from government support if needed.
“Liquidity is expected to remain adequate and likely to benefit from government support if needed,” said the report.
The challenging operating environment put pressure on asset quality, although Islamic banks’ asset quality metrics fared better than at conventional peers. The impaired financing ratio deteriorated mildly to 1. 8 percent at 2020 end, compared to 2.9 percent at conventional banks , owing particularly to higher retail and government lending and less private sector corporate lending. The financing impairment -charges -to -average gross financing ratio increased significantly to around 90bp (in line with conventional banks) as Islamic banks built up provisions for the pandemic.
