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Global Credit Research - 09 Apr 2013
Limassol, April 09, 2013 -- The outlook for Qatar's banking system remains stable, unchanged
since 2010, says Moody's Investors Service in a new report
published today. The outlook reflects Qatar's benign economic
environment and the rating agency's expectation that Qatari banks
will maintain strong financial metrics, including low levels of
non-performing loans (NPLs), robust earnings and sound capitalisation.
However, Moody's says that these positive factors are counterbalanced
by (1) an undiversified economy heavily reliant on the oil and gas sector;
(2) the system's relatively high dependence on short-term
foreign funding; and (3) a still-developing corporate-governance
and risk-management culture.
The new report, entitled "Banking System Outlook: Qatar",
is now available on www.moodys.com. Moody's subscribers
can access this report via the link provided at the end of this press
release.
Moody's expects that the government's extensive infrastructure
investment programme will boost banks' business opportunities over
the 12- to 18-month outlook period and lead to lending growth
of between 20%-25%. However, the rating
agency acknowledges that downside risks to the supportive operating environment
stem from increased geopolitical tensions that could threaten Qatar's
export capacity and, over the longer term, the impact of adverse
changes in oil and gas prices (the hydrocarbon sector accounts for around
60% of the country's GDP).
Qatari banks' asset quality will be supported by the country's
strong economic environment, the substantial government spending
and the sizeable proportion of government-related loans (43%
of the total). As such, Moody's expects that the system's
NPLs will remain at around 2% of gross loans over the next 12-18
months. However, the banks' asset quality remains exposed
to event risk given (1) the high single-party exposures and opaque
transparency surrounding local conglomerates; (2) the still-questionable
commercial rationale for many of the government-related projects
financed by the banks; (3) rapid credit expansion, which raises
questions about banks' underwriting standards and ability to manage
related risks; and (4) the moral hazard that past government interventions
have created. In addition, the banks' still-high
dependence on short-term foreign-market funding leaves banks
vulnerable to market conditions.
The system's Tier 1 ratio will likely trend down to 15%-16%
by end-2013, as banks continue to finance their fast-growing
balance sheets domestically and abroad. However, Moody's
notes that projected capitalisation metrics are sufficient to absorb losses
and remain above the regulatory minimum of 10% even under the rating
agency's "adverse" scenario, which considers the
impact of a sustained drop in oil and gas prices and significant contraction
in economic activity.
Moody's expects that Qatari banks' 2013 bottom-lime
profitability metrics will remain broadly stable, with the return-on-average-assets
ratio ranging between 2.2%-2.4%.
Higher lending volumes, low provisioning requirements and banks'
low cost bases will support the system's overall profitability.
However, the banks' net interest margins will likely decline,
due to the regulator's imposition of interest-rate caps on
retail lending and banks' increased exposure to lower-yielding
project finance lending.
Subscribers can access this report via this link: http://www.moodys.com/research/Banking-System-Outlook-Qatar--PBC_149910
NOTE TO JOURNALISTS ONLY: For more information, please call
one of our global press information hotlines: London +44-20-7772-5456,
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0800-891-2518, or Buenos Aires 0800-666-3506.
You can also email us at mediarelations@moodys.com or visit our
web site at www.moodys.com.
Elena Panayiotou
Analyst
Financial Institutions Group
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Yves J Lemay
MD - Banking
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Cyprus Ltd.
Kanika Business Centre
319 28th October Avenue
PO Box 53205
Limassol CY 3301
Cyprus
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's: Qatar's banking system outlook remains stable
No Related Data.
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