Global woes oil shock hit Qatar banks

(MENAFN- The Peninsula)

By Satish Kanady

DOHA: Global uncertainties and decline in oil prices have decelerated the growth of Qatari banking sector’s assets during 2014.

Both conventional commercial banks and foreign banks recorded substantial decline in their growth rates though they remained in positive territory. The top three banks accounting for over 60 percent of the total assets of the all commercial banks in the country also displayed similar trend in last year.

Contrary to the overall trend Islamic banks’ assets recorded a marginally higher growth during 2014 as compared to the previous year which was primarily contributed by higher growth in Islamic finance Qatar Central Bank’s (QCB) financial stability review for the year 2014 noted.

Bank-group-wise data on assets loans and deposits also present considerable variation. During 2014 all assets loans and deposits decelerated in conventional and foreign banks but the same accelerated in Islamic banks. Among the conventional and foreign banks the deceleration was relatively sharp in the case of deposits than that of assets and loans.

The growth in banking assets during 2014 was driven by increase in credit facilities. Contrary to stable share of government securities and increase in share of other investments in the previous year share of both classes of investments declined during 2014 more in government securities.

Also contrary to the previous year the growth in deposits at 10 percent was slower than 13 percent growth in loans resulting in reversal of the decline in loan to deposit ratio recorded in the previous year. The loan to deposit ratio increased from 105 percent at end-2013 to 108 percent at end-2014. The share of borrowings from other domestic banks and banks abroad increased during the year as against decline during the previous year.

The share of debt securities declined during the year as compared to increase in the previous year.

Compared to the deceleration in overall bank credit the slowdown in the growth of deposits was much sharper. The growth in annual average gross deposits fell sharply from 29.6 percent in 2013 to 13.6 percent in 2014 from the previous year’s 29.6 percent.

Private sector credit in foreign currency remained steady while that to non-residents edged up. Local currency credit to the private sector continued to grow at a steady pace.

The credit acceleration in private sector during 2014 has been due to sharp growth in credit to general trade contractors and consumption . Due to sharp acceleration in credit for consumption during the past two years this segment has overtaken real estate as the largest component of private sector credit. The share of consumption credit stood at 28.1 percent of the total private sector credit at end 2014 as compared to 27.4 percent at the end of the previous year. During the same period the share of credit to real estate sector declined from 29.1 percent to 27.0 percent due to relatively slower growth.

Real estate and consumption which account for over half of the private sector credit recorded decline in their combined share over time reflecting diversification of credit deployment towards general trade contractors and services. Monthly data on sectoral credit reveal that the amount of credit deployed for consumption exceeded that of real estate in the second half of 2014 reversing the earlier trend of allocation of larger share of credit to the real estate sector.