2020 Q2 Qatar Banking Sector report - September 2020 - PwC Middle East

Signs of resilience in the Qatar banking sector

As lockdown restrictions begin to ease globally, financial institutions are turning their attention to new competitive landscapes within what is now considered the new normal, and how to come out ahead. Having secured short-term liquidity and taken measures to cope with loss in profitability, the financial sector is seeking opportunities to achieve competitive reinvention and differentiation. This ongoing strategic rethinking provides a catalyst to accelerate the organization-wide transformation agenda, especially focusing on:

• Honing operational resilience by realigning cost structure and productivity
  
• Targeting new customer segments through new digital channels and products
• Upskilling staff to promote new, agile, remote ways of working
• Minimising the financial impacts of insolvencies and NPLs
• Monitoring risks associated with the current regulatory and government spotlight
• Starting discussions for potential collaborations and acquisitions

Similar trends and dynamics are taking place in the Qatar banking sector, where we have seen an increased interest by Qatari financial institutions to forge new collaborations with Fintech companies, targeting young digital-savvy customers both in Qatar and abroad. In parallel, new synergies and mergers have also recently been discussed in Qatar.

This edition of the ‘H1 2020 Qatar Banking Sector Report’ covering 8 listed commercial banks, also shows that the Qatar banking sector minimised the impact of the pandemic, proving to be resilient. Banks grew their lending activity, which resulted in supporting local businesses. The aggregated total assets of the 8 listed commercial banks grew 1.9% in the first half of 2020, to hit QAR 1.66 Tn, while the aggregated loans and advances to customers grew 2.1% to reach QAR 1.44 Tn in the first six months of 2020. In the three months between 30 June and 31 March 2020, growth of assets was sustained by an increase of the aggregated equity of the 8 listed commercial banks, up by QAR 7.1 Bn to QAR 182.6 Bn (+4.1% vs Q1 2020) while total liabilities were down by QAR 5.0 Bn to QAR 1.473 Tn (-0.34% vs Q1 2020). Furthermore, the asset composition of the 8 listed commercial banks registered a shift towards cash and balances with Qatar Central Bank increasing by QAR 28.8 Bn (vs FY 2019) to QAR 119.2 Bn (+31.8% vs FY 2019), which was mainly reflected in the balance sheet with the reduction from banks down by QAR 22.6 Bn (vs FY 2019) to QAR 106.8 Bn (-17.4% vs FY 2019).

With regards to income statements, total profits of the 8 listed commercial banks reached QAR 11.47 Bn, decreasing 8.8% compared to H1 2019. The profits were especially impacted by an intensification of the aggregated provisions by QAR 3.2 Bn (+10.2% vs FY 2019), which caused the increment of the aggregated provisions to total loans and advances ratio to 3.1% (+0.23 PP vs FY 2019). As a result of the global impact of the previous period, banking asset quality and profitability were expected to be impacted. While globally provisions are on the rise, Qatar's banking sector has contained their impact on profitability. Financial institutions in Qatar were swift in initiating internal cost restructuring to deal with volatility; capitalising on the opportunities for transformation and digitalization.