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Qatar banking sector emerges from COVID-19 volatility in a strong position

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June 06, 2021

6 June 2021: PwC in Qatar today launched its full year 2020 Qatar Banking Sector Report, which highlights the resilience displayed by Qatari banks despite volatility caused by the pandemic and drop in oil prices in the region. The report explores how through a unified approach, Qatar’s eight publicly listed commercial banks have weathered macroeconomic headwinds and demonstrated resilience throughout 2020, with aggregated results being marked by growth of assets.

A unified approach

Through increased public and private sector collaboration, coupled with a drive to diversify revenue streams and attract new investors, Qatar institutions swiftly mitigated the risks of COVID-19 induced volatility. The role played by the Qatar Central Bank (QCB) was vital in maintaining a robust banking ecosystem. Measures introduced by QCB significantly moderated economic volatility and laid the groundwork for a post-pandemic recovery across the private sector. 

While Qatar’s eight listed commercial banks (Ahlibank, Commercial Bank of Qatar, Doha Bank, Al Khaliji, Qatar Islamic Bank, Qatar International Islamic Bank, Qatar National Bank and Masraf Al Rayan), have responded to the measures introduced by QCB and revised their strategies in line with macroeconomic development they have reported a decrease in profitability levels. Noting that,FY2020 was underscored by growth of assets and streamlined non-interest costs.

In FY2020, the aggregated assets of the eight listed commercial banks regulated by QCB grew by 7.3% to reach QAR 1.74 trillion as compared to FY2019, which is reflected in the 7.0% growth of total aggregated loan and advances, which reached QAR 1.20 trillion. Such increases show that the lending activity remains healthy, driven by diversified sources of funding. However, profitability was impacted by market volatility, with FY2020 aggregate profits of the eight commercial banks falling by 12.43% to QAR 21.59 billion as compared to FY2019. The reduction can be attributed to several factors, including reduced revenue, primarily driven by a reduction in interest income. Moreover, this decline in income is linked to the aggregated impairment allowance of the eight listed commercial banks, which increased by 17.3% year-on-year, showing the risk of credit loss has increased over the last financial year.

Burak Zatiturk, Financial Services Leaders, PwC Qatar, commented: “Measures introduced by QCB provided much needed liquidity amid times of increased volatility. During 2020, the expansionary lending activity of listed banks is testament to market confidence in the business environment and the Qatari economy.” Adding “With banks maintaining a consistent lending strategy despite a volatile market in 2020, we can see signs of mid-to-long-term optimism for Qatar’s resilience, the evolution of its robust financial industry and GDP growth. In the near-term, we will see banks continuing to focus efforts on transformation, through the adoption of digital technologies, such as RegTech in order to future-proof their operating models.”

QFC continues to attract businesses 

In addition to the strength and agility demonstrated by the eight listed commercial banks in Qatar, the Qatar Financial Centre (QFC) and the Qatar Financial Centre of Regulatory Authority (QFCRA) have built a robust business environment that continues to attract foreign investments, despite macroeconomic uncertainty. 

QFCRA reported robust FY2020 financial and operational results, including an increase in new license issues of 63.7% as compared to FY2019, underscoring confidence in the potential for future growth. Moreover, QFCRA’s regulated financial institutions reported FY2020 total assets of QAR 44.0 billion, a rise of 12.8% as compared to FY2019, and a significant 51.2% increase as compared to FY2018.

Ahmed AlKiswani, Regional Financial Services Partner, PwC Middle East stated: “QFC continues to attract organisations from a wide range of industries. Despite pandemic-induced headwinds QFC experienced growth of its financial services and non-financial services sectors. With QFC’s growth was bolstered by new types of licenses being issued, such as fintech start-ups and scale-ups, a new legal service policy supporting licensed law firms to work with foreign clients, and new regulations enabling financial institutions establish a representative office in Qatar.”

Qatar’s financial industry has demonstrated its agility and resilience throughout 2020, supported by enabling regulations and central bank policies. The banking sector remains in a position of strength, ready to capitalise on new technologies and a diversified investor base, in order to continue to be a catalyst for economic development and growth.

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