Mubasher: Moody's Investors Service has maintained its ‘Stable’ outlook for the banking system in Qatar which has remained unchanged since 2010, according to a report issued on 19 July.
The outlook reflects Moody's expectation that operating conditions will continue to be favourable for Qatari banks as a result of high government spending amid low oil prices, as well as its forecasts of how bank creditworthiness will evolve in Qatar over the next 12-18 months, according to the report.
Moody's has expected GDP growth of 4.1% for 2016 despite continued low oil prices, as strong government spending on infrastructure projects may drive economic expansion and support the FIFA World Cup in 2022.
Qatar's economic growth remains the strongest in GCC, in spite of the GDP growth that has slowed over the last few years from high rates of around 13.4% in 2006-2014, Moody’s said.
“Moody's forecasts problem loans to increase to around 2% of total loans by December 2016, compared to 1.5% the year before. Nevertheless, the rating agency notes that the nonperforming loan ratio is likely to remain the lowest in the GCC heading into 2017,” the rating agency added.
Banks’ profitability is foreseen to remain solid overall in 2016, with an expected return-on-assets to decline to around 1.7% for 2016 from 1.9% in 2015. Meanwhile, liquid assets should remain at around 25% of total assets, down from around 28% as of December 2014, the report noted.
“Aggregate deposit levels from these entities had recently fallen to 32% of the system total as of March 2016, down from 42% since 2013 creating a funding gap. Consequently, we expect a higher reliance on market funding heading into 2017, raising refinancing risks and hence leaving the banks more vulnerable to shifts in market sentiment,” Moody’s said.
