World Cup will benefit all Qatari banks

07 December 2010

Banks to benefit from new infrastructure projects and upgrading of transport systems

The 2022 World Cup will benefit Qatari banks, says international ratings agency Moody’s.

The agency says it expects all Qatari banks to benefit from stronger economic activity and higher credit demand over the next 12 years.

“This is credit positive for Qatari banks, as it will create long-term business growth opportunities, enhance their franchise development in their domestic market and contribute to revenue generation through higher loan volumes,” says Elena Panayiotou, an analyst at Moody’s office in Limassol, Cyprus, and lead analyst for Qatari banks in a report published on 6 December.

“We estimate that accelerated government spending of $57bn over the next decade for infrastructure development projects relating to stadium construction, accommodation, and upgrading of existing transportation systems will create new lending activity for all banks.”

Total banking assets amounted to $129.4bn at the end of 2009, representing approximately 130 per cent of Qatar’s GDP, a ratio that remains low compared with other developed markets.

The larger banks, which have higher capital levels, are likely to benefit the most, as they will be able to participate in large financing deals, notes the report.

It then cites the examples of the large, foreign-owned banks established in Qatar, along with Qatar National Bank (QNB), the country’s largest lender with a 39 per cent market share in terms of assets.  

“However, the corporate lending activities of all Qatari banks are expected to benefit from peripheral activities related to these large projects, including the funding of smaller projects, contracting, and subcontracting,” says Panayiotou.

“Nonetheless, a key challenge for the Qatari banks going forward will be to secure longer-term funding in order to finance such longer-term projects. To this end, we expect that higher market issuance in the international markets will be needed to attract longer-term funding and address any maturity mismatches on banks’ balance sheets.”

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