News Desk |
The Performance of Qatari Banks Last Year
A report published by the KPMG on Wednesday stated that Qatar had witnessed positive results in its banking sector with an average growth of 9.5 per cent in total profits along with a growth of 3.2 per cent in its total assets for the fiscal year 2018.
In addition to the increase in profit and asset value, there was a two per cent drop in the cost-to-income ratios for majority of the Qatari banks- the drop in cost-to-income ratios reflected the focus on improving net profits.
The report further suggested that due to the increase in the ratio of loan impairment and non-performing loan (NPL), credit quality has been quite a challenge for Qatari banks. Omar Mahmood, the head of financial services of KPMG in the Middle East and South Asia, while commenting on the low credit quality said, “Although NPL ratios remain relatively low when compared to international norms, 2018 saw higher ratios in comparison to the previous year,”
Qatar, accused of funding terrorism by the Saudi-dominated bloc, is at present working on to improve its credibility through the introduction of mechanisms such as Anti Money Laundering (AML) and other significant tools to tackle similar elements.
Moreover, due to the adoption of International Financial Reporting Standard IFRS 9 in January last year, the expected credit-loss was of three billion dollars. Qatar, in this case, however remained less effected on its net Capital Adequacy Ratios (CARs) despite adopting the IFRS 9, according to the report.
The overall performance of the listed commercial banks of Qatar had been reasonably well in terms of profit and asset value. Further commenting on the performance of Qatari banks, Omar Mahmood said,
“Overall, it has been a positive year for listed banks in Qatar. While profitability and assets have, on average, increased from the previous year, banks in Qatar have also managed to reduce costs by 1.3% on average, resulting in a sector cost-to-income ratio of less than 28.2%. With the lowest cost-to-income ratio in the region, these impressive results reflect the continued focus by the sector, and the country as a whole, on efficiencies to improve net profits.”
Read more: Qatar among world’s top competitive economies
Qatari Banks to Remain Focused on Local Market in 2019
Qatar is being careful with banking investments as it continues to face regional challenges. Therefore, violating its own National Vision to diversify its economy, Qatar is expected to focus on the local market amid economic blockade by its GCC neighboring states.
Qatar, accused of funding terrorism by the Saudi-dominated bloc, is at present working on to improve its credibility through the introduction of mechanisms such as Anti Money Laundering (AML) and other significant tools to tackle similar elements.
Touching upon the increase in strict regulatory by the Qatari state, the report affirmed the role of Qatar Development Bank and the Qatar Financial Centre’s (QFC) role in increasing investment through transparent measures and reforms.
In addition to the increase in profit and asset value, there was a two per cent drop in the cost-to-income ratios for majority of the Qatari banks- the drop in cost-to-income ratios reflected the focus on improving net profits.
While commenting on the need to introduce banking reforms, Mahmood commented on Qatari efforts to introduce “new accounting standards, Basel III requirements and an increasing focus on Anti Money Laundering (AML) and Know Your Customer (KYC) will not only keep regulators busy in the year ahead, but will also drive banks to reshape their strategies to better prepare for, and effectively manage, tighter regulations, particularly in the new fast-paced digital era.”
The reformations being part of the Second Strategic Plan for the Financial Sector 2017-2022 are also significant for the upcoming Financial Action Task Force (FATF) review on Qatar that is crucial for the state considering its present relationship with its neighbors.
Qatari Banks to Move Towards Digitalization
The report also discussed the need to foster innovation in the Qatari banking sector through the inculcation of digital reforms. Also part of the Second Strategic Plan for the Financial Sector 2017-2022, digitization will remain a key focus of Qatar’s banking sector.
While commenting on the need to move with the changing technological developments, Mahmood said, “In order for banks to differentiate themselves in a competitive market and remain relevant, they need to continue to innovate their practices and digitize their processes. Whether that is through their go-to-market channels, or through innovative technology in the back and front office, we expect an increased investment in this space.”
Read more: Qatar Financial Centre and World Economic Forum; shaping new agendas
“Financial institutions and regulators are showing greater support for the fintech sector, through various recent and upcoming initiatives, such as the launch of a local innovation hub and the expected opening of the first digital branch of an international bank in Qatar. The emergence of fintech is only the latest wave of innovation to have hit the banking industry yet it has the potential to lower barriers of entry to the financial services market and elevate the role of data as a key commodity and drive the emergence of new business models.” he commented while referring to Qatar’s efforts of digitization.