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Qatari banks’ foreign assets rise to $20bn

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Points of Essence:

  • Qatar announced the jump in profit of foreign assets owned by Qatari banks by $20.1bn in April from $15.7bn in 2007 gained from their overseas expansion. The profit for its local banks continues to grow. It was also revealed that the profits of the Shariah-compliant Islamic banking sub-sector rose last year, but the share of total assets remained at 16%. This was influenced by a greater business competition in Qatar where all leading commercial banks have started offering Islamic Islamic products through their subsidiaries.

By Pratap John
Foreign assets of Qatari banks have climbed to $20.1bn in April from $15.7bn in 2007 as they expanded their lending portfolios and investments abroad, the Institute of International Finance has said.

Official reserves held by Qatar Central Bank have risen to $13.4bn, equal to over four months of the country’s import cover, the Washington-based global body of financial institutions said.

In its latest country report IIF said Qatar’s other foreign assets are held in various funds and are likely to be “substantial”. How-ever, due to a lack of information on QIA holdings and four other funds, it is not possible to determine accurately their total assets (foreign and domestic).

Local banks’ profits continued to improve in the first half of 2008, IIF said.

The number of banks in Qatar has remained unchanged since 2006. Out of a total of 16 banks, there are nine Qatari institutions (which include six commercial banks and three Islamic banks) and seven subsidiaries of foreign banks.

An increasing number of foreign banks have established a presence in the Qatar Financial Centre (QFC).
The sector remains concentrated; the top three local banks accounted for 75% of total deposits at the end of 2007, somewhat similar to 2006.

QNB, the largest bank, continues to dominate the sector. It accounted for 43% of total assets last year. The second-largest bank, Commercialbank, accounted for 17% of assets.

While profits of the Shariah-compliant Islamic banking sub-sector continued to grow last year, the share of total assets remained at 16%.

This is partly explained by the greater competition, as all the leading commercial banks in Qatar have started offering Islamic Islamic products through their subsidiaries.

Moreover, competition between banks has led to the introduction of a variety of personal, corporate and investment products including those offered in compliance with Islamic principles.

QNB reported a 54% rise in profits to a record QR1.9bn compared to the same period in 2006, driven by increased assets, customer deposits and unrestricted investment accounts.

The local banks’ asset quality has improved over recent years, with a relatively low ratio of non-performing loans (NPLs) to total loans, IIF said.

“Provisioning to cover NPLs has been on a declining trend over recent years, reflecting buoyant market conditions and improvements in loan portfolio quality. Moreover, banks’ exposures to the DSM 2006 correction are likely to have been partly covered by a realisation by some borrowers of recent stock market gains.

Overall, banks in Qatar remain well-capitalised with high liquidity levels, and they are fully compliant with Basel II requirements regarding prudential regulations and risk classifications,” the IIF country report said.

However, IIF noted that the local banking sector’s main “structural constraint” has been Qatar’s small corporate base, which has led to funding and credit concentrations. In response, the main commercial banks continue to expand regionally.

However, some regional banks have entered the Qatar market, increasing domestic competition. Lending to the government represents a further credit concentration.

“While profitable and low risk, and despite the state’s robust financial position, lending to the government entails opportunity costs given the increasing vibrancy of the private sector economy,” IIF said.


Written by Suapi Shaffaii

September 23, 2008 at 6:58 am

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