By Satish Kanady
DOHA: The rising real estate exposure is raising concerns about Qatari banks. Qatar’s banking sector has large exposure towards real estate developers and contractors, which comprise 40 percent of private sector lending of banks, cautioned a report titled GCC Banking Sector Outlook for 2013.
Most listed Qatari real estate companies reported disappointing results in 3Q 12.
Among its covered banks, QNB has remained focused toward public sector lending and is unlikely to see any significant asset quality deterioration, while other Qatari banks with their increased exposure to the real estate sector in 2011 and 2012, may face asset quality deterioration going forward.
“We expect to see real estate related asset quality deterioration, as the substantial real estate development is unmatched by demand… Qatari banks have aggressively increased lending to the real estate sector; however, we expect a rise in real estate delinquencies at some point,” Bahrain-based Investment Bank SICO’s research note said yesterday.
However, the research continued to prefer QNB with its strong public sector lending growth potential, which is underpinned by a low operating expense and strong asset quality.
SICO analysts expect strong public sector lending to continue in Qatar, with many development projects in the pipeline. QNB, with its strong public sector orientation, well-capitalised balance sheet, low loans-to-deposits ratio, and high quality of assets, is best placed to capitalise on this lending opportunity.
“We expect to see lending growth of 24 percent CAGR during 2011-13. Moreover, QNB has increased its dividend payout ratio from 28 percent in 2011 to 45 percent in 2012 and expects the bank to sustain dividend payout at the current level.
Qatari banks are looking at expanding their international operations focusing on Egypt, Turkey and parts of Asia.
“We believe that this will continue in 2012, as the banks have a strong capital base, except one, and may look to diversify their earnings.
“Although international expansion may be positive for banks’ balance sheet growth, the impact on the share price will depend on each target’s valuation and attractiveness, and the successful operational merger of the acquired entities,” the report said.
The 2013 outlook that noted GCC banks’ balance sheet growth will continue to remain strong in 2013.
The report said it is bullish on Saudi Arabian banks at current valuations; but see no major triggers for Qatari banks in the coming year.
The GCC governments’ focus on economic diversification to lower their reliance on hydrocarbons is positive for the private sector and expects to see greater borrowing demand.
GCC banks are well capitalised, and with ample liquidity in the system they are capable of meeting increased lending needs.
The Peninsula
