Banks in Qatar have seen a growth in their asset base, driven by the need to continue to support the country's future ambitions, KPMG said in its latest report on ‘GCC listed banks results 2020’.
Qatar banks' costs continue to remain the lowest in the region, which reflects the relentless focus on efficiencies to help counter the impact of increased provisioning, it said.
Despite the financial uncertainty arising from Covid-19, Qatar's listed banks recorded the lowest profit decline amongst its regional peers, KPMG said.
“Increased loan provisioning as a result of liquidity and credit challenges being faced by borrowers reflected the more cautious approach taken by banks. This impact was partially offset by higher interest spreads and lower costs,” KPMG said.
Omar Mahmood, head, Financial Services for KPMG in the Middle East and South Asia, and partner at KPMG in Qatar said, “Qatar National Bank continues to maintain the top spot for the largest bank in the GCC in terms of assets and profits; banks in Qatar had the highest sector average for return on equity (13%); and banks in Qatar were the clear leaders amongst their regional peers in terms of their cost-to-income ratios (24%) demonstrating the tight cost control measures across the sector.”
Overall, Mahmood noted how banks in the GCC are cautiously optimistic about the future. “Banks have come through the past year as being more resilient, backed by strong government support, which positions them well for future growth, while also being very aware of the challenges that the current global economic conditions continue to pose for the regional banking sector”.
He said, “2020 was a pivotal year for banks in the GCC, as their digital transformation plans were accelerated, hybrid working was introduced and customer centricity remained at the forefront”.
Mahmood also commented on the numbers explaining how “the region posted a drop in profitability (31%) for the first time in a number of years and this was primarily as a result of a 59% increase in credit provisions. Market sentiment also followed the fundamentals with a 10% drop in listed bank share prices too”.
Mahmood further commented that “although we saw a drop in a number of key financial metrics for listed banks in the GCC in 2020, banks also posted robust asset growth of 8.2%; they witnessed an increase in capital adequacy ratios to a sector average of 18.7%; and showed stability in costs with the cost-to-income ratio averaging 41% for the region in 2020.”
Looking forward, Mahmood noted see six key themes for the banking sector in the region.
“First we expect the challenging credit environment to remain with rising NPLs and loan impairment as a result of the impact of Covid-19 across all sectors of the economy; second, we see banking sector consolidation continuing with further M&A activity expected thus creating larger, healthier and stronger financial institutions; third, we see digital as being here to stay with the emergence of new digital-only players and traditional banks making further digital investments; fourth, we predict agile and flexible working with a blended work from home and office approach becoming the norm; fifth, we see ESG taking centre stage and moving from the periphery to the core of Board agendas; and finally we see regulators embracing tech through a focus on digital currencies, open banking, and licensing new fintech entrants to the market."
