Qatar banks lead GCC region with lowest cost-to-income, highest coverage ratios: KPMG

Qatar banks continue to lead the region with the lowest cost-to-income ratio at 25.6% and the highest coverage ratio for stage 3 loans at 85.1%, reflecting strong financial resilience, according to KPMG.

In its ‘GCC listed banks’ results’ report, KPMG noted that in Qatar’s banking sector, Qatar National Bank’s position has been reaffirmed as the largest bank in the GCC by assets, reaching $356bn.

The report highlights strong asset growth across GCC banks, supported by robust capital adequacy ratios. Profitability saw a notable increase, driven by higher interest margins and disciplined cost control, while net interest margins (NIMs) remained stable despite economic fluctuations.

Non-performing loan (NPL) ratios declined, reflecting prudent credit risk management, and cost-to-income ratios remained among the lowest globally, emphasisng continued operational efficiency. Investor confidence has also been reinforced, with bank share prices showing stability in a volatile market.

Across the GCC, profitability increased by 10.5%, driven by loan book growth, stable interest margins, lower loan impairments, and ongoing cost-efficiency measures, KPMG noted.

Total assets increased by 9.2%, supported by lending to high-quality customers. While net interest margins saw a slight dip of 0.1%, the overall NPL ratio improved, decreasing by 0.3% to 3.3%, signalling a continued conservative approach to credit risk management.

Return on Assets (ROA) (1.5% in 2023) slightly increased by 0.04% compared to the previous year reflecting stable profitability relative to asset growth.

Cost-to-income ratios remained stable compared to 2023 at 39%, reflecting the continued focus on cost reductions and operating efficiency. Moreover, the average coverage ratio for stage 3 loans remained broadly in line with prior year at 67%, highlighting the listed banks' cautious provisioning approach.

Looking ahead, KPMG predicts that the GCC banking sector will continue evolving with an increased focus on AI and automation to enhance operational efficiencies, alongside the strengthening of ESG frameworks to embed sustainability within banking strategies. The rise of regulatory technology (RegTech) is expected to support compliance and risk management, while further industry consolidation will likely foster stronger and more competitive financial institutions.

Additionally, balance sheet growth is projected to accelerate, driven by strategic investments and effective risk management, ensuring sustained financial stability and resilience.

Omar Mahmood, Head of Financial Services for KPMG in the Middle East, South Asia, Caucasus and Central Asia, and partner at KPMG in Qatar, commented, "The GCC banking sector remains a pillar of economic stability and growth, demonstrating resilience in the face of macroeconomic uncertainties. The sector’s ability to maintain strong capital positions, enhance asset quality, and embrace digital transformation underscores its commitment to sustainable progress.

“Looking ahead, we expect a continued focus on managing non-performing loans, cost control, and the integration of AI and ESG principles into banking strategies, ensuring long-term competitiveness and stability."