Qatar leads GCC's banking sector growth

By Satish Kanady

DOHA: Led by QNB, Qatar-based banks outperformed GCC peers across various metrics in the second quarter of 2016 (Q2, 2016). Banks in Qatar witnessed the strongest growth in terms of total assets, net profits, net interest and non-net interest income growth.

Driven by QNB";s acquisition of Turkey";s Finansbank and loan book expansion of other banks, the total assets of GCC banks expanded an aggregate 8.4 percent year-on-year to $1.3 trillion in Q2,16. Qatar-based banks witnessed the strongest growth in total assets (24 percent YoY), followed by banks in the UAE (7.6 percent) and Saudi (2.2 percent), and while Kuwait-based banks"; asset base remained unchanged, a research note issued by Global Investment House (GIH) stated.

The report based on the banks covered by GIH, showed Qatar banks outperformed the regional peers in terms of net earnings. Net profit of banks in Qatar increased the most (3.5 percent) YoY, followed by Kuwait (2.1 percent) and Saudi Arabia (1.8 percent), while UAE banks registered a fall of 3.3 percent. On QoQ basis, net profit of the GCC aggregate increased 4.5 percent, led by Qatar gaining 10.6 percent, followed by the UAE (5.2 percent) and Saudi (1.7 percent), while Kuwait";s profits fell 1.8 percent.

Of Qatar-based banks, QNB reported profit growth of 16.1 percent YoY due to increase in net interest and non-net interest income for the bank, which was partially offset by a massive surge in provisions. Commercial Bank of Qatar reported a massive 62.9 percent YoY fall in net income for the bank, as the company";s total income declined and provisions burgeoned up by 76.1 percent.

According to the GIH research note, the regional banks"; net interest margins improved after eight consecutive quarters of margin compression, due to QNB";s acquisition of Finansbank. Qatar-based banks topped the charts, recording a substantial rise in advances of 27.7 percent YoY during the quarter, led by QNB";s acquisition of Finansbank. All Qatar-based banks registered a growth in advances, led by QNB (39.4 percent YoY) and Qatar Islamic Bank (25.3 percent YoY). In terms of net interest income (NII) growth, Qatar grew the most by 45.7 percent in the second quarter on YoY basis, because of QNB";s FinansBank acquisition. Qatar was followed by UAE (9.3 percent) and Kuwait (2.4 percent), while NII of the banks in the UAE declined 1.8 percent. Among Qatar-based banks, a major spurt was witnessed in QNB (74.5 percent YoY), followed by QIB (7.1 percent). Over, the GCC";s NII grew strongly at 11.9 percent YoY and 11.1 percent QoQ.

Non-interest income of GCC banks rose 2.1 percent YoY during the quarter led by a 9 percent growth in fee income. Qatar (26.8 percent) and the UAE (6 percent) recorded a positive change in non-interest income, while Saudi (-8.5 percent) and Kuwait (-6.1 percent) reported a decline in non-interest income. The fee income of GIH";s GCC coverage rose 9 percent YoY, led by a significant 53.2 percent YoY jump in the fee income of Qatar banks. Qatar-based banks witnessed a significant rise in the non-interest income for Q2, 16, with QNB (82.7 percent YoY) leading the gains, followed by Masraf Al Rayan (30.3 percent).

Provisions of the region";s banks covered by GIH analysts surged 24.2 percent YoY during Q2, 16 due to higher built-up of provisions owing to the slowdown in the region as lower oil prices scenario weighed on the economy. Even on QoQ basis, provisions surged 14.7 percent. Among individual countries, provisions increased for Qatar (173.6 percent YoY) and the UAE (16.2 percent), while Kuwait (-4.7 percent) and KSA (-1.5 percent) witnessed a decline in provisions. Among Qatar banks, provisions surged for QNB (363.9 percent), Commercial Bank (76.1 percent, and Doha Bank (31 percent), where as they fell for QIB (-5.8 percent) on Y-o-Y.

The Peninsula