Pratap John

The aggregated total assets of eight listed commercial banks in Qatar grew 3.7% in the first nine months of 2020 to QR1.69tn, a PwC report has shown.

Local banks showed a steady growth in 2020 despite implications of the Covid-19 pandemic, the PwC study said.

The findings from PwC’s latest ‘2020 Qatar Banking Sector Report’ covering eight listed commercial banks, revealed that Qatar’s financial institutions are accelerating transformation programmes to build financial institutions of the future aimed at increasing cost efficiencies and lending activities by reaching out to new customer segments.

As restrictions taken in the first half of 2020 gradually ease, the upcoming six months will offer the rare opportunity to embrace change at an unprecedented pace with both corporations and customers.

To design the financial institutions of the future, there are key priorities to focus on which includes integrating digital with traditional branches in order to attract a younger and digitally-savvy customer segment as well as using new methods for assessing credit worthiness and better understanding the customer, PwC noted.

The positive growth experienced in Q3, 2020 has been accelerating between June 30 and September 30 of last year, when the aggregated total assets of the eight listed commercial banks increased the pace of growth by 1.8%, compared to 0.13% growth between June and March 2020.

With regards to income statements, total profits of the eight listed commercial banks reached QR17.1bn, decreasing 10.9% compared to Q3, 2019, PwC noted.

Profits remained under pressure due to an intensification of the aggregated provisions in the nine months of 2020 (+13.2% vs FY 2019). However, between June and September 2020, provisions only recorded a smaller growth (+2.7% vs H1 2020), evidencing the ability of the eight listed commercial banks to substantially control provisions in the last quarter.

Consistently, the increment of the aggregated provisions to total loans and advances ratio remained unchanged (3.09% in Q3 2020 vs 3.08% in H1 2020). Profitability was also impacted by non-interest expenses.

The eight listed commercial banks have taken action in containing the aggregated non-interest expenses (staff costs, depreciation, amortisations and other expenses), which decreased by -28% vs FY 2019 to hit QAR 8.3Bn.

However, the efficiency ratio (non-interest expenses over revenues) registered an increase of 1.22PP, showing that non-interest expenses have proportionally increased their impact on profitability.

Burak Zatiturk, Qatar financial services leader, PwC Middle East, said: “The Qatar banking sector is embracing change, and evidence can be found in the Q3 2020 financials. In light of the lessons recently learned throughout the past year, financial institutions now have the capacity to accelerate transformation programmes in order to design the financial institutions of the future.”

The ‘2020 Qatar Banking Sector Report’ shows that banks steadily grew their lending activity, accelerating the pace of expansion by diversifying the source of funding through a double-digit growth of debt securities and Sukuk financing.

Bassam Hajhamad, country senior partner and consulting leader, PwC Middle East, said, “The consolidation of major banks recently seen in Qatar will result in stronger financial institutions with significant liquidity available to support the country’s economic growth.

“Not only will this strengthen the country’s banking sector, but we also expect to see a positive impact on the local stock exchange as well as an increase in future transactions.”