Booming economy sustains banking growth
- Qatar National Bank (QNB) first half profits rise 10.2 per cent compared to H1 2014, to QR5.6bn ($1.5bn)
- QNBs assets have grown 9.7 per cent since June 2014, to QR511bn
- The sustained growth is thanks to high government spending driving the Qatari non-oil economy
Qatar National Bank (QNB) has reported that its net profit rose by 10.2 per cent to QR5.6bn ($1.5bn) in the first half of 2015, compared with the same half last year.
The excellent results for the bank follow a 10.3 per cent increase in 2014 yearly profits, which reached QR10.5bn.
QNB has increased its assets by 9.7 per cent since June 2014 to QR511bn, to reach their highest levels yet. QNBs assets have grown by an average of 22.4 per cent a year since 2009, although the growth rate has slowed to single figures since 2013.
QNBs increased profits were driven by higher operations income, which reached QR8.2bn, up by 7.5 per cent compared with June 2014, while operating costs rose just 5.4 per cent.
The banks loan book grew by 5.3 per cent since the beginning of the year to QR356bn. The ratio of non-performing loans fell slightly to 1.5 per cent.
Deposits rose by 5.8 per cent over the half to reach QR381bn, giving QNB a loan-to-deposit ratio of 93 per cent.
The banks capital adequacy ratio stood at 14.4 per cent on 30 June 2015, higher than the regulatory minimum requirements of Qatar Central Bank and the Basel Committee.
US-based Moodys Investors Service predicts a strong outlook for Qatari banks, of which QNB is the largest with a 44 per cent market share, thanks to expansionary government spending and support.
Moodys predicts this will drive 10.7 per cent growth in the non-hydrocarbons sector, compensating for weakened liquefied natural gas output, according to a recent report. This will allow domestic loan growth of 10-15 per cent.
Despite currently low oil prices, we expect Qatars real GDP will expand by 7 per cent in 2015, says Nitish Bhojnagarwala, Moodys assistant vice-president and the author of the report. A combination of sizeable government resources and a relatively low fiscal breakeven level allows elevated public spending and hence continued economic expansion,
Overall, 34 per cent of Qatari banks loan books are government lending, which supports asset quality. Government entities will continue borrowing to finance infrastructure and stadium building programmes.
High concentrations with single borrowers on the loan books do present a risk.
Continued lower oil prices will also reduce the flow of government deposits, the largest depositor. Banks may then have to rely more on the market for funding, raising costs.
Despite the challenges, Moodys expects Qatari banks will remain the most profitable in the GCC.
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