Qatar Banking Sector Q3 2016 earnings review
Credit costs normalize
- ​Margin compression persists with NIM declining to 2.28% from 2.31% in Q2 and 2.51% in Q3 15A (ex- QNB), underpinned by higher funding costs amid continued liquidity constraints in Qatar. Further, asset yields do not re-price as there are only a limited number of high quality borrowers who are price sensitive.
- Meanwhile, as long as QE continues, Qatari banks are likely to face stiff competition from internationals. NIM compression may even accelerate next year as the central bank pushes for a LtD of 100%.
- Growth remains subdued as banks focus on managing margins amid the liquidity constraints (LtD is stretched at 116.7% from 112.4% in Q2 and 111.6% in Q3 15A). MARK had the highest loan growth of +3.8% q/q with CBQ the worst at -1.4%.
- Asset quality remains healthy in Qatar, but NPL ratio increased to 2.06% from 1.86% in Q2, whilst credit costs seem to be normalizing (in particular for QIB, QIIB and Khaliji) with CoR increasing to 83bps from 45bps in Q2 and 29bps in Q3 15A. CBQ has the worst asset quality with higher NPL formation in its local corporate book turning a loss during Q3 with credit cost equating to 255bps versus 171bps in Q3 15A. Only MARK still continues to benefit from negative credit charges.
Established in 2007, Arqaam Capital is a specialist emerging markets investment bank, bringing regional and international product offerings to the emerging markets. Arqaam Capital combines international best practice with expertise in the markets in which we operate. Our primary role is to provide financial intermediation and create investment opportunities for frontier and emerging markets investors looking to invest in their own markets and abroad, as well as international investors seeking opportunities in target frontier and emerging markets. Arqaam Capital is headquartered in the Dubai International Financial Centre (DIFC), with additional offices in Libya, Lebanon, Egypt, and South Africa.
Arqaam Capital's research platform provides the largest coverage footprint of MENA equities and one of the largest on the African continent with a total of 300 stocks under coverage. Arqaam Capital is ranked as one of the leading research providers in the region - a reflection of its broad coverage universe, its in-depth and high quality research, as well the compelling investment ideas that the team generates. The analysts closely analyze their sectors and issue in-depth company and sector research while the strategy team connects the micro with the macro, focusing on index analysis, macroeconomics and strategy research.
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