Backed by strong government support and operating in an economy that recorded some of the fastest growth in the world last year and is expected to expand by up to 18% in 2010, Qatar’s banking sector is poised to begin another period of accelerated growth.
That is not to say local banks spent the past year idle. Overall, the country’s banking sector appears to have weathered the global financial crisis far better than most, posting combined profits of $2.7bn in 2009, just 0.1% down on the previous year’s result. Qatar National Bank was responsible for almost half of the $2.7bn, having made a record $1.15bn in net profits, 15% up on 2008, with three other lenders, Doha Bank, Qatar International Islamic Bank and Al Khaliji all building on their profits from 2008.
Of the country’s eight other domestic banks, only four recorded lower profits, one of which was Commercialbank, which posted a drop 10.4% in 2009, down from $466m to $417m. According to Abdullah bin Khalifa Al Attiyah, the chairman of Commercialbank, 2009 was a challenging year, but thanks in part to state support the bank and the rest of the sector had risen to the challenge and would be looking toward stronger results in 2010.
“The strength of our regional franchise has enabled Commercialbank to absorb the challenges of last year and also re-align the business so that it is better positioned to capture the potential value that recovering markets will offer,” he told a meeting of shareholders in early February.
Though 2009 may have been a more difficult year than most for Qatar’s economy, GDP still grew by around 10% according to the governor of the Qatar Central Bank (QCB), Sheikh Abdullah bin Saud Al Thani. High levels of liquidity helped this figure. According to the QCB lending by local banks rose by 11% last year against the figures for 2008.
Despite this there have been complaints from the business community and consumers that access to credit has been restricted, with some suggesting the QCB has instructed banks to limit loan activity and enacted strict conditions on banking activity.
The QCB’s Sheikh Abdullah has been swift in rejecting such claims raised in the local media, saying in mid-February that the QCB had put in place a series of measures to ensure continued liquidity in the financial sector. These included providing funds to banks at low interest rates and pumping money into the system.
There was no question of the QCB having issued any new restrictions on credit, Al Thani said in an interview with the Qatar News Agency. “The central bank, with the full support of the government, has been working to enhance confidence and trust among the public and to provide sufficient liquidity for the banking sector through contributions to their capital and the purchase of some of their investment portfolios, as well as by providing real estate loans,” he said.
This support, combined with the tight regulatory regime maintained by the QCB, helped the sector avoid the worst of the global recession, said Qatar Islamic Bank chairman Sheikh Jassem bin Hamad bin Jassim bin Jabor Al Thani.
“The initiatives taken by the government of Qatar through acquiring as shareholder a stake in the national banks’ capitals via the Qatar Investment Authority, played a significant role in consolidating confidence in the Qatari banking sector, and therefore in the national banks’ financial positions,” Sheikh Jassem said in early February.
The banking sector got more good news in mid-February when Prime Minister Sheikh Hamad bin Jassim bin Jabor Al Thani announced the 2010-11 budget would be larger than the previous fiscal years and would be tailored to fuel further economic growth.
The announcement was welcomed by the banking sector, with Abdul Hakeem Mostafawi, the CEO of HSBC Qatar, saying on February 11 that the proposed stimulus budget went a long way to building confidence in the economy.
“The economic forecast for Qatar in 2010 is very positive and the government went about supporting the economy in a very responsible way, and outcome was far better than in many other countries,” Mostafawi said.
That forecast includes estimated GDP growth of between 16% and 18%, with the state committed to increasing spending and backing private sector expansion. Banks are looking forward to their share of this activity.