2020 Q1 Qatar Banking Sector report - March 2020 - PwC Middle East

The resilience of the Qatar banking industry in times of uncertainty

Financial sectors across the globe are grappling with increased spikes in volatility due to the current unprecedented economic climates we are operating in. In the GCC, the effects of this can be especially witnessed in the banking sector, where a large number of corporate customers have been seen to withdraw credit facilities in order to increase their liquidity buffers. This puts pressure on banks to deal with covenant breaches and unprofitable customers, creating a low-rate environment in which banks need to operate. This is likely to limit financial flexibility of regional and development banks that are considering supporting measures for SMEs and corporate customers.

To ease the effects of this and lift pressure off businesses, various supervisory and relief measures have been put in place by the government of Qatar in the form of fiscal stimulus packages and government directives, such as:

• directive to support and provide financial incentives, amounting in total to QAR 75 billion to the private sector, enabled the allocation of guarantees to local banks at anamount of QAR 3 billion. The program is a 100% guarantee scheme of the government of Qatar to help mitigate volatility impacts by relieving the most critical short-term payments which private sector employers will face during the next 3 months (May, June and July 2020) as it includes staff payroll-salaries and rental fees.
• The Qatar Central Bank has established mechanisms to encourage banks to postpone loan installments and obligations of the private sector with a grace period of six months.
• Qatar Development Bank postponed the installments of all borrowers for a period of six months.
  
• Government funds are set to increase their investments in the stock exchange by 10 billion riyals.
  
• Tax filings are postponed until June 30, 2020.
  

As a result of these measures, the Qatar Banking Sector showed resilience in dealing with these uncertain times.

In this edition of the ‘Q1 Banking Sector Watch’ report we take a look at the performance of the eight listed commercial Qatari banks over thelast quarter, our analysis of the financial results at 31 March 2020 compared to the results at 31 December 2019, the actions banks can take to navigate these uncertain times in the short-term and mid-term, and how they can position themselves for the economic rebound that will follow.