Photo by Abdul Basit © The Peninsula
Despite the lockdown and other challenges, banks in Qatar proved their resilience against the impact of the coronavirus pandemic (COVID-19). The combined assets of the listed commercial banks witnessed a growth of nearly two percent during the first six months of this financial year, noted a report by a leading consulting firm.
The findings from PwC’s ‘H1 2020 Qatar Banking Sector Report’ covering 8 listed commercial banks, revealed that Qatar succeeded in minimising the impact of the pandemic on its banking industry. The aggregated total assets of the 8 listed commercial banks grew 1.9 percent in the first half of 2020, to hit QR1.66 trillion, while the aggregated loans and advances to customers grew 2.1 percent to reach QR1.44 trillion in the first six months of 2020. Globally, as the lockdown restrictions begin to ease, financial institutions are turning their attention to the new competitive landscape within the new normal, and how to come out ahead.
Having secured short-term liquidity and taken measures to cope with loss in profitability, the financial industry is globally seeking opportunities to achieve competitive reinvention and differentiation. Similar trends and dynamics are taking place in Qatar’s banking sector, where there has been an increased interest for Qatari financial institutions to forge new collaborations with Fintech companies, targeting a new audience segment of young digital-savvy customers both locally and internationally. In parallel, new synergies and mergers have also recently been discussed in Qatar and banks also grew their lending activity, which resulted in supporting local businesses.
Burak Zatiturk, Qatar Financial Services Leader, PwC Middle East, said: “The ongoing strategic rethinking provides a catalyst to accelerate the organisation-wide transformation agenda, especially focusing on honing operational resilience by realigning cost structure and productivity, upskilling staff to promote new and agile ways of working, minimising the financial impacts of insolvencies and NPLs, and monitoring risks associated with the current regulatory and government spotlight.”
In the 3 months between March 31 and June 30, growth of assets was sustained by an increase of the aggregated equity of the 8 listed commercial banks, up by QR7.1bn to QR182.6bn (+4.1 percent vs Q1 2020) while total liabilities were down by QR5bn to QR1.473 trillion (-0.34 percent vs Q1 2020).
Furthermore, the asset composition of the 8 listed commercial banks registered a shift towards to the cash and balances with Qatar Central Bank increased by QR28.8bn (vs FY 2019) to QR119.2bn (+31.8 percent vs FY 2019), which was mainly reflected in the balance sheet with the reduction of due from banks down by QR22.6bn (vs FY 2019) to QR106.8bn (-17.4 percent vs FY 2019).
With regards to income statement, total profits of the 8 listed commercial banks reached QR11.47bn, decreasing 8.8 percent compared to H1 2019. The profits were especially impacted by an intensification of the aggregated provisions by QR3.2bn (+10.2 percent vs FY2019), which caused the increment of the aggregated provisions to total loans and advances ratio to 3.1 percent (+0.23 percentage points vs FY 2019).
As a result of the global impact of the previous period, banking asset quality and profitability were expected to be impacted. While globally NPLs are on the rise, Qatar’s banking sector has contained its impact on profitability.
Financial institutions in Qatar were swiftly in initiating internal cost restructuring to deal with volatility; capitalising on the opportunities for transformation and digitalisation.
