(MENAFN- The Peninsula) Qatari banks' earnings are expected to grow a modest four percent in Q2, 2103, compared to the same period last year. QNB and Doha Bank are likely to report better financial performances during the second quarter of 2013.
"Qatari banks are likely to continue their strong balance sheet growth, with several government projects rolled out in first half of 2013 and more being in the pipeline. We believe QNB will benefit the most, while other banks will witness balance sheet growth from Q3, 2013 onwards," Chiradeep Gosh, an analyst with Investment Bank SICO noted yesterday.
Saudi banks are likely to report healthy balance sheet growth. With lending increasing at 4.2 percent in quarter-over-quarter in 2013, supported by ample liquidity in their balance sheet, greater demand from corporate sector and improving money supply.
"On the other hand, we expect Qatar and UAE banks to report modest lending growth in Q2, 2103. Only QNB is likely to report strong balance sheet growth, as it benefits from the roll out of Qatari Government projects," he said in a Q2, 2103 preview note sent to The Peninsula.
Qatari banks are expected to witness further net interest margins (NIM) pressure. Much of the lending growth in Qatar is expected to come from government-supported projects, which will earn the banks lower yields.
On the asset quality, the SICO analyst noted Qatari banks reported asset quality deterioration in Q1, 2013, in line with SICO's expectations, following their sharp rise in real estate exposure over 2012. "We expect Qatari banks' provisioning to increase by 20 percent year-on-year in Q2, 2013.
Due to the implementation of Qatar Central Bank's regulation on investments, Qatari banks are expected to witness two quarters of lower non-interest income.
The QCB has introduced regulations related to Qatari banks' investment portfolio, which may negatively impact the banks' earnings, except QNB, over the next two quarters. "Our preliminary estimates suggest that the earnings impact would be around 3-4 percent this quarter, with Qatar Islamic Bank (QIB) and Commercial Bank of Qatar (CBQ) likely to take greater earnings hit to comply with the regulations."
The SICO analyst expects Saudi banks' aggregate Q2, 2013 earnings to grow moderately by 4 percent year-on-year, as strong balance sheet growth will be offset by lower margins due to stiff completion and lower fee income.
Saudi stock market turnover declined to $109bn in Q2, 2013 from $160bn in Q2, 2012, which is likely to adversely impact their trading-related fees. On the other hand, Saudi banks' balance sheet growth should remain robust, with loans expected to grow at 13 percent year-on-year, supported by deposits growth of 16 percent year-on-year in Q2, 2013.
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