(MENAFN- Gulf Times)
By Pratap John/Chief Business Reporter
Qatar’s private-sector loan growth is picking up and local banks are benefiting from growing non-resident deposits and their expansion abroad a recent report has shown.
Overall deposits are growing as a result of non-resident deposits which were up by 119% year on year and represent a record 11% of all deposits the Economist Intelligence Unit (EIU) said in a report.
Local private deposits are growing but only moderately at 5.5% year on year; in fact total domestic deposits from both the government and private sector saw their first year-on-year decline in six years slipping by 0.5% in April.
Aggregate data from the banks which includes their foreign operations show that their deposits grew by 8% in the year to March 2015 ahead of the Qatar Central Bank's (QCB) figure (which was up by 6.9% year on year in March and differs in two ways from bank results: it includes only local banks' operations in Qatar but also counts licensed branches of foreign banks which hold about 4% of deposits).
This according to the EIU suggests that foreign operations may be enhancing the sector's deposit base. Recent developments in this area include the QNB's purchase last year of a 19% stake in Ecobank a pan-African lender and Doha Bank's opening of the first branch of a Qatari bank in India the home country of about one quarter of Qatar's residents in May.
Total credit growth in Qatar is picking up as a result of strong private-sector borrowing which grew by 22.2% in April slightly down from 22.6% in March which was a near six year high as some major projects gather steam.
The QCB's breakdown of credit by categories shows strong growth of 26.5% in loans for personal consumption (such as car loans) the largest component of private-sector credit as well as a 31.1% growth in general trade. The construction industry and services sectors all saw strong credit growth with the weakest element being real estate (11.2%).
The higher growth in loans compared with deposits means that the loan-deposit ratio for the sector rose to 99% up from 90% in September 2012. The ratio exceeded the QCB's targeted maximum of 100% at most local banks in Qatar.
At some banks the ratio is being kept down by foreign operations as the QCB's figure for domestic banking operations is higher at 106% at end 2014.
If the strong growth in foreign deposits — both in Qatar and in foreign branches — does not continue then some of the banks may be unable to meet the demand for loan growth (unless they increase borrowing as some of them have been doing) the EIU said.
In any case "Qatar's banking sector remains strong and well capitalised" the EIU points out. The capital-adequacy ratio of local commercial banks stood at 15.9% at end-2014 and the non-performing loan ratio at the end of March 2015 averaged just 1.7%. Both of these figures are extremely strong by international and regional standards.
Although Qatar’s real GDP growth rates have slowed from the high double digits seen in recent years there are still prospects for further growth in the future in both the retail sector given strong population growth (which was 9.2% year on year in May) and project financing in relation to the government's infrastructure development programme.
Longer term Qatari banks are likely to look ever more to international expansion both by acquisition and organic growth building on their solid capital bases to access fast-growing markets in the Middle East Africa and Asia the EIU said.
However it will require a change of strategy to deliver value on investment abroad when the Qatari banks will face fiercer competition and will not have the backstop of a supportive government to underpin their balance sheets and income the report said.
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