The banking system in Qatar has been robust, with a compounded annual growth rate (CAGR) of 20% in assets from March 2008 March 2012 and another 20% in the year to March 2013. Higher energy prices and increased gas production have funded a large public spending program, which has driven credit growth and resulted in overall asset gains, according to QNB Group's soon to be published report, Qatar Economic Insight 2013.
Total banking assets to GDP increased from 97% in 2008 to 117% in 2012. This is higher than the GCC average of 93%, but still comparatively lower than some major economies such as Germany and China. Qatar's banking sector asset quality remains stronger than in many countries in the world, with non-performing loans (NPL) estimated at just 2% of total loans in 2012. Qatar's banking system also has sound capitalisation, with a capital adequacy ratio of 19%, far above Basel requirements.
The main driver for Qatar's banking growth was domestic assets, which in turn was driven by 27% growth in credit (accounts for 71% of domestic assets). Conventional banks account for the largest share of assets (72%) and, therefore, were largely responsible for the strong growth with their balance sheets expanding by 18% in 2012.
The top five banks in Qatar accounted for 77% of total banking sectors assets in March 2013. QNB is the largest bank in Qatar and the MENA region with total assets of US$104.4bn as at March 2013. QNB has also put Qatar on the global banking landscape by emerging as "The Strongest Bank" in the world for 2012 as per the recently released survey by Bloomberg Markets.
The sector's overall credit facilities increased by 25% in the year to March 2013 to US$142bn, compared to March 2012. Credit facilities to the public sector accounted for the largest portion (40%) of overall loans as at March 2013
The public sector was also the key growth driver for overall gains in banking sector deposits. Deposits from the public sector rose sharply by 83% year-on-year as at March 2013.
stable source of funding for the Qatari banks, they have also been widening their funding options in recent years. Banks have been tapping into international bond markets and in 2012 issued bonds to the tune of US$4.5bn. Qatari banks have high credit ratings, along with a record of generating consistently strong growth in their operations and financial results. This has allowed them to successfully access international debt markets and find funding options at competitive rates.
The net profit of Qatari banks increased by 7.5% in 2012 to reach US$4.4bn. The return on average equity (ROAE) stood at 17.5%, while the return on average assets was at 2.7%. Higher lending, a low cost base and low provisioning requirements have supported the banks overall profitability.
We expect Qatar's banking sector to maintain its profitability in 2013-14. It is expected to continue on its strong growth trajectory also taking into account further global expansion by local banks.
Qatari banks have been swiftly expanding their global footprint in recent years. Most local banks already have an international presence through branches and offices. In addition, a number of Qatari banks have acquired a stake in financial institutions in the MENA region and in other select markets. Current plans will see continued expansion by local banks. QNB has the largest international network among MENA banks, with a presence in 25 countries. Other local banks are also actively seeking international growth opportunities. Qatari banks will continue to look at international expansion in 2013-14 as global banking asset prices remain attractive and as Qatar rapidly expands its international investments, providing related banking needs and opportunities.