By Satish Kanady
DOHA: Weighed down by heavy lending to government-supported projects, Qatari banks are likely to earn lower yields during the first quarter of 2013.
Local banks are also expected to witness deterioration in asset quality due to their rising real-estate exposures during the period.
Moreover, the rising demand for foreign currency denominated loans will also negatively impact Qatari banks’ NIMS (net interest margin), the investment bank SICO’s GCC banks preview noted yesterday.
The SICO analysts see further risk from increasing real-estate exposure, and expect to see higher loan-loss-provisioning negatively impacting earnings.
“We estimate that 59 percent, 48 percent and 29 percent of new lending in 2012 by CBQ, Doha Bank and QIB respectively can be attributed to the real-estate and contracting sectors,” the report said. Qatari banks are likely to take a breather in Q12013 after reporting strong balance sheet growth for the past 10 quarters.
The lending growth is expected to remain flat during the period and the government is likely to infuse deposits into the system to support lending, which the analysts believe will benefit QNB the most.
QNB’s asset quality should not see a significant deterioration, due to its relatively lower direct real-estate exposure.
However, it should be noted that QNB has a large exposure to government agencies amounting to 52 percent of total loans, and no disclosure provided to the sectors in which these agencies operate.
On valuations and change in target price, the research preview said Qatari banks are trading at a thin premium to their GCC peers despite stronger balance sheet growth expectations, in contrast to the past when they commanded relatively higher valuations.
The report noted Qatari banks are aggressively looking at international expansion, which could prove negative to their capital adequacy requirements in the short to medium term.
The investment bank analyst said the GCC banks under its coverage are likely to report 4 percent Year-on-Year earnings growth in Q12013 compared to the same period last year.
They estimate GCC banks’ balance sheet growth to remain muted during the period with an overall 1.5 percent Quarter-on-Quarter lending growth, despite Saudi banks’ expected healthy loan growth of 2.6 percent Q-o-Q.
Although Qatari banks’ lending growth is likely to appear strong at 23 percent YoY, most of it was achieved in the last three quarters, and expect a -0.1 percent Q-o-Q contraction during Q12013.
“Most UAE banks have reported stabilisation in asset quality, and we expect to see provisions tapering down in H12013. In contrast, we expect Qatari banks to witness asset quality deterioration related to their rising real-estate exposures,” the report said. The Peninsula
