Doha: Qatari banks are the most efficient in the GCC said Standard & Poors’ Ratings Services in the report released yesterday.
Qatari banks’ profitability will likely remain strong over the next 12 months in its report published today “Risks Are Unlikely to Dent Qatari Banks’ Expected Robust Profitability In 2014”.
“Qatari banks display higher efficiency than peers in the Gulf, mainly owing to QNB with its strongest efficiency ratio among the banks we rate in the GCC,” it said in the report.
“QNB’s ratio of non-interest expenses to total revenues stood at 20.4 percent for 2013. Other rated Qatari banks display efficiency ratios on a par with peers’ in the Gulf,” it said.
It foresees robust profitability for Qatari banks in 2014 following their out-performance versus peers in the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates) over the past five years.
“High interest margins, although contracting; briskly increasing business volumes mainly on the back of the government’s investments; and banks’ generally low cost bases are the main factors fueling this performance,” said Standard & Poor’s credit analyst
Mohamed Damak.
In this largely favorable environment, and given the solid economic growth we forecast in Qatar over the next few years, we think lending will continue to increase by about 10 percent-15 percent per year, it said in a press release yesterday.
The banking industry faces several risks, however. The normalisation of interest rates in the US within the next two years could be the most immediate damper on banks’ profitability, in our opinion.
A steep increase in US interest rates could squeeze Qatari banks’ interest margins because of the structural mismatch of their balance sheets, which carry long-term assets and short-term deposits.
On the upside, we think that the US Federal Reserve’s monetary policy normalization will be gradual, allowing Qatari banks the necessary time to adjust their pricing. The Peninsula
