By MOHAMMAD SHOEB
DOHA: The period of easy credit may be over in Qatar after the 2008 financial crisis but the number of loan defaulters has increased marginally despite stricter lending by banks.
Non-performing loans (NPLs) of commercial banks in Qatar in 2013 were 1.9 percent, up marginally from 1.7 percent in 2012, according to data released by the banking regulator, Qatar Central Bank.
International Monetary Fund (IMF) figures for years between 1995 and 2008 show that the GCC nations were among the countries in the world with very low levels of NPLs. And Qatar had one of the lowest NPLs in the region at 1.7 percent in the period.
The highest NPL in the region was for Kuwait at 5.5 percent in 2008 followed by Bahrain (2.9 percent) and the UAE (2.4 percent). Oman had the lowest at 1.2 percent.
World Bank (WB) statistics from 2009 until 2013 also show that GCC states are among the countries with lowest NPLs.
The marginal rise in NPLs by 0.2 percentage points in Qatar in 2013 was attributed to large credit growth (over 78 percent) of banks in the year. Qatar, to recall, is a country where banks dispense large credit volumes. Their total lending to individuals for consumption in 2013 alone stood at QR80bn ($22bn).
The primary factors affecting overall assets quality is the quality of credit portfolios and credit administration programmes.
According to QCB’s 37th Annual Report for 2013, domestic credit in Qatari Riyal was reported at QR431.31bn ($118.44bn) as of end of 2013, up 78.4 percent compared to QR241.70bn ($66.37bn) in the previous year (2012). The massive increase in local currency denominated domestic credit was due to rise in lending to government institutions.
Domestic credit in foreign currency denominations was QR101.76bn ($27.94bn) as of 2013-end. There was a considerable drop in foreign currency credit, especially to the public sector. The local currency-wise increase in credit to the public sector was in tandem with the decrease in foreign currency credit in 2013.
The ratio of provisions for NPLs was reported to be 96.8 percent in 2013 compared to last year’s 97.5 percent. The ratio of loan provision to total loans increased to 1.85 percent in 2013 compared to 1.7 percent in the previous year.
The ratio of total provision as a percentage of total assets was 1.3 percent as against 1.2 percent of 2012, according to the report.
According to major ratios for banks’ profitability criteria, in 2013, return on equity reduced to 16.5 percent as against 17.7 percent in 2012. During the same period return on assets reduced to 2.1 percent (in 2013) over 2.4 percent in the previous year, whereas net return on earning assets declined to 2.5 percent in 2013, compared to 2.6 percent in 2012, according to the report.
The Peninsula
