The Qatari Islamic banks saw their lending grow 7.2 percent in 1H16 (first half of 2016), outpacing the 6.5 percent growth at conventional banks (excluding Qatar National Bank’s (QNB) acquisition of Finansbank A.S.in Turkey), mainly due to higher retail and real estate financing, said Fitch yesterday.
Islamic banks accounted for 25.2 percent of total financing at end-1H16, against 25 percent at end-2015 (including Finansbank under QNB, the share was 23 percent at end-1H16). Appetite is growing for Islamic financing and sharia-complaint services from retail and corporate however, growth is expected to have slowed in 2016 (for Islamic and conventional banks) due to reduced hydrocarbon revenues and government spending.
Fitch expects profitability to remain healthy, but margins to be under pressure from tighter market liquidity, which will increase banks’ funding costs.
The average Islamic bank impaired loan ratio was 1.1 percent at end-1H16, lower than the conventional bank average of 2.1 percent, due to high growth in financing. However, asset quality is expected to weaken with slower growth and seasoning of the financing book. All banks have high exposure to real estate and contracting, which has deteriorated due to delays in government payments to contractors.
