Well provisioned and supervised, Qatar’s banks have withstood recent global and regional uncertainties, leaving them in a strong position for further growth. The sector’s banks stand to benefit from the country’s new strategic vision – the Third National Development Strategy (NDS-3) for 2024-30, which prioritises financial services in Qatar’s future development and diversification. Meanwhile, the sector is embracing digitalisation, financial technology (fintech) adoption, and a host of new banking methods and services.
Challenges remain amid turbulence in the global economy, while climate change poses increasing risks and unpredictable outcomes. At the same time, the Qatari economy continues to adjust to the post-2022 FIFA World Cup reality, which has impacted certain sectors more negatively than others. Recent years of monetary tightening worldwide have boosted some banks’ bottom lines, while others have found the operating environment more challenging. Yet, given its recent track record, strong buffers and deep pockets, Qatar’s banking sector looks prepared for the challenges ahead.
Oversight
The Qatar Central Bank (QCB), headquartered in Doha, serves as the main authority for the sector. As of March 2024 Sheikh Bandar bin Mohamed bin Saoud Al Thani held the position of governor at the central bank. The QCB is comprised of several specialised departments and units, including the Banking Supervision Department, the Fintech and Innovation Department, and the Financial Crime Compliance Department. Additionally, the Qatar Credit Bureau reports to the governor of the QCB, who, in turn, is accountable to the bank’s board of directors.
The Banking Supervision Department comes under the Supervision Division, led by Hamad Ahmad Al Mulla, the assistant governor of supervision as of March 2024. The division is responsible for overseeing the financial sector, including banks, insurance and takaful (Islamic insurance) companies and their support services, and other non-banking financial institutions. The division has a compliance function, ensuring that financial sector institutions meet regulatory requirements. It also considers applications for licences and their renewal, and requests to open new offices, bank branches, ATMs and other services related to the financial sector.
Regulations
Amiri Decree No. 15, enacted in 1993, established the QCB as the country’s sole monetary authority. In 2012 Law No. 13 on the QCB and the Regulation of Financial Institutions delineated the central bank’s functions and objectives, encompassing monetary policy formulation and enforcement, as well as financial and banking supervision aligned with national plans and strategies. Furthermore, the QCB administers a deposit protection scheme and advises the Council of Ministers. Other pertinent laws governing the sector include the 2000 Foreign Capital Investment Law, the 2002 Investment Funds Law, and the 2019 Law on Combatting Money Laundering and Terrorism Financing.
The QCB issues instructions to financial institutions, with Qatar following the guidelines and standards of the Basel Committee on Banking Supervision. The QCB also represents Qatar in a range of other international and regional organisations. The former group includes the Islamic Financial Services Board, the Accounting and Auditing Organisation for Islamic Financial Institutions, and the IMF. The latter group includes the Gulf Monetary Council, with Qatar a member of the GCC.
In the context of Islamic banking, the QCB determines regulatory frameworks to ensure compliance with sharia principles. These regulations cover various aspects of Islamic banking, including capital adequacy, risk management, governance and product offerings.
Zones & Exchanges
In addition to the regular onshore banking sector, Qatar is home to the Qatar Financial Centre (QFC), which was established by Law No. 7 of 2005 and has its own legal and regulatory system, and a transparent tax regime aligned with international standards, all of which is supervised and regulated by the QFC Regulatory Authority (QFCRA). The QCB governor serves as the chair of the QFCRA, while the financial centre is subject to the Qatar International Court, rather than regular Qatari courts, when it comes to civil and commercial matters. Rules and regulations around company licensing and taxation at the QFC – as elsewhere – are determined by the Ministry of Commerce and Industry.
As of March 2024, 19 banks were registered as operating at the QFC, including China’s Bank of China, UK-based Barclays, Lebanon-headquartered BLOM Bank, Germany’s Deutsche Bank, Abu Dhabi’s First Abu Dhabi Bank (FADB), US-based JP Morgan Chase, Japan-headquartered Sumitomo Mitsui Banking and Turkey’s Vakifbank. Banks at the QFC are able to undertake investment, corporate and wholesale banking business, as well as Islamic banking activities. The QFC allows 100% foreign ownership, 100% repatriation of profits and a reduced 10% tax on locally-sourced profits. In October 2021 the QFCRA signed a memorandum of understanding with the QCB on sharing information on companies registered at the centre, including banks.
A further regulatory and supervisory body for banks that are listed on the Qatar Stock Exchange (QSE) is the Qatar Financial Markets Authority. The authority sets rules, regulations and reporting standards for all listed companies, in line with international best practices.
Plans & Programmes
Since its unveiling in 2008 Qatar has been following the Qatar National Vision 2030 (QNV) long-term development plan, which outlines the objective of economic diversification, with financial services – including banking – playing a pivotal role in this endeavour. Consistent with this vision, the QCB itself has published a series of long-term strategies with the release of the Third Financial Sector Strategic Plan. This plan for the sector aligns with and complements the broader goals of the (NDS-3).
The NDS-3 outlines seven strategic national objectives for the coming period, ranging from sustainable economic growth, to quality of life and societal cohesion. The achievement of sustainable economic growth hinges on diversifying away from hydrocarbons, with a number of clusters proposed for this purpose. These clusters are further categorised into growth, enabling, resilience and future clusters, with financial services seen as one of three enabling factors.
In alignment with this approach, there is a heightened emphasis on the development of the insurance sector and capital markets. However, the enabling cluster also encompasses initiatives aimed at promoting savings, growing digital payments, and increasing financing to small and medium-sized enterprises (SMEs). During the plan period, new regulations pertaining to SME financing will be introduced to boost banking and fintech, complemented by mentoring programmes focusing on corporate finance and governance (see analysis).
The Third Financial Sector Strategic Plan, meanwhile, prioritises banking as one of its four strategic pillars, alongside insurance, capital markets and the digital ecosystem. Three growth areas have been selected for banks: tailored finance, specialised advisory services, and digital banking and payment services. At the same time, the plan sets foundational targets of enhanced regulatory measures and efficiency, developing talent and capabilities for the sector.
Furthermore, specific numerical targets have been established. By 2030 the aim is for the financial services sector to contribute some QR84bn ($23bn) to GDP, with the sector achieving a compound annual growth rate of 4.7%. In terms of commercial credit, by 2030 the plan aims for 77% of this going to private companies with 7% of the total going to SMEs.
Diversification is therefore not only a target for the economy as a whole, but for the banking sector as well. Tailored financing includes new product launches, both in conventional and Islamic banking, while specialised advisory services include developing non-interest revenue and overseas expansion. Savings and investment products for foreign residents are also advocated, encouraging Qatar’s many foreign residents to take out mortgages and investment in the country to deepen their involvement in the local economy.
The plan complements the NDS-3 at the sector level, guiding Qatar’s banks towards 2030 and potential transformative growth. Leveraging past fintech initiatives, the Qatar Development Bank (QDB) initiated efforts in 2017 with the Qatar Fintech Task Force. In 2019, the QCB, along with QDB and QFC, introduced the National Fintech Strategy, comprising about 20 initiatives, including the Qatar Fintech Hub. Concurrently, the QCB has been refining draft regulations for its fintech regulatory sandbox, undergoing testing from 2023 to 2024. Additionally, the QCB is exploring the feasibility of introducing a central bank digital currency.
Sector Players
The banking sector consists of conventional and Islamic banks, with the Islamic segment accounting for around 25% of sector assets at the end of the first quarter of 2023, according to credit ratings agency Fitch. This made the sector the fifth-largest Islamic banking segment globally, underscoring its influence (see Islamic Financial Services chapter).
Structure
As of January 2024 the QSE Banking and Financial Services sector featured four conventional and four Islamic banks, as well as one sharia-compliant investment bank and four holding, leasing or brokerage companies. Conventional banks included QNB, Commercial Bank of Qatar (CBQ), Doha Bank and Ahli Bank, while Islamic banks comprised Qatar Islamic Bank (QIB), Masraf Al Ryan, Qatar International Islamic Bank and Dukhan Bank. Lesha Bank operated as the sharia-compliant investment bank.
The financial services sector led the QSE with a market capitalisation of QR296.2bn ($81.3bn) in January 2024, representing around 49.3% of the QSE’s total. The nine banks had a total market capitalisation of QR295bn ($81.3bn), or around 49.15% of the QSE’s QR600.2bn ($164.7bn) total. The listings further show the sectoral dominance of one lender: QNB. With a market capitalisation of QR148.7bn ($40.8bn) in January 2024, QNB held around 25% of the QSE’s total capitalisation. Its closest rivals in these terms were QIB, with QR46.6bn ($12.8bn); Masraf Al Ryan, with QR23.7bn ($6.5bn); CBQ, with QR22.4bn ($6.1bn); and Dukhan Bank, with QR20.8bn ($5.7bn). The Asian Banker financial services platform listed QNB Group as the largest bank in the MENA region in 2021, surpassing FADB and Emirates NBD Bank. Forbes magazine concurred with that assessment in 2022, and the S&P ratings platform maintained QNB’s top position in 2023, with FADB ranked second and Saudi National Bank in third place.
Conventional Banks
QNB, established in 1964, was the first Qatari-owned lender in the country. It is 50% owned by the sovereign wealth fund, the Qatar Investment Authority (QIA), and 50% by the public. The bank has major overseas operations, including ownership of QNB Finansbank in Turkey, QNB Alahli in Egypt, QNB Tunisia and QNB Indonesia. It also has sizeable stakes in banks in Togo, Jordan, Iraq and Syria, with branches throughout the world. Indeed, as of April 2024 it has operations in 28 countries on three continents and employs some 30,000 people worldwide.
QNB’s long-term credit ratings in early 2024 were “Aa2” from Moody’s, “A+” from S&P’s and “A” from Fitch, while the short-term ratings were “P1”, “A1” and “F1” from the same institutions, respectively. At the end of 2023 QNB Group – which includes its overseas branches – also reported total assets of QR1.2trn ($329.4bn), up from QR1.2trn ($326.3bn) at the end of 2022. Annual profit stood at QR15.7bn ($4.3bn), up from QR14.5bn ($4bn) the year before. In terms of capital adequacy ratios (CARs), the common equity tier 1 (CET-1) ratio was 14.8%, the tier 1 capital ratio was 18.7% and the total capital ratio was 19.8%. These figures surpassed those recorded at the end of 2022 and were significantly higher than the Basel III CARs.
As of January 2024, CBQ was the second-largest conventional bank in the country with respect to market capitalisation, with an approximate value of $6.3bn. CBQ, which provides wholesale and retail banking services, has several overseas interests. These include 100% ownership of Turkey’s Alternatifbank, and strategic partnerships with National Bank of Oman, Sharjah’s United Arab Bank and local Massoun Insurance. CBQ’s subsidiaries include Commercial Bank Financial Services, Orient 1, and a range of asset management, real estate and leasing outfits.
In early 2024 CBQ’s held long-term credit ratings of “A2” by Moody’s, and “A-” according to S&P and Fitch. Meanwhile, the short-term ratings from the same agencies were “P1”, “A2”, and “F2”, respectively. At the end of 2023 the bank reported assets of QR164.4bn ($45.1bn), down on 2022’s QR168.9bn ($46.4bn), while annual profit stood at QR3bn ($823.4m), up from QR2.8bn ($768.5bn) a year previously. CBQ’s CET-1 ratio was 10.1%, its tier 1 capital ratio was 14.1% and its total capital ratio was 14.9% – all above the Basel III requirements.
Ahli Bank ranked the third-largest conventional bank in terms of market capitalisation as of January 2024 at $2.7bn. It has two business segments – retail and private banking, and wealth management. The bank, which is 47.7% owned by the QIA, has 17 branches in Qatar, while its wholly-owned subsidiary, Ahli Brokerage, is active in the capital markets. As of June 2023 Moody’s assigned the bank ratings of “A1” for the long term and “P1” for the short term. In March 2024 Fitch rated the bank “A” for the long term and “F1” for the short term. Ahli Bank’s 2023 year-end results showed total assets of QR60.5bn ($16.6bn), up from QR48.5bn ($13.3bn) at the end of 2022. Profit for the year also rose, from QR771.8m ($211.8bn) in 2022 to QR836.5m ($229.6bn) in 2023. The bank’s CET-1 ratio was 17%, its tier 1 capital ratio was almost 19.9% and its total capital ratio was slightly over 21% – numbers approaching double the Basel III requirements for the bank.
Doha Bank began commercial operations in 1979 and has overseas branches in Kuwait and the UAE, as well as locations in Europe, Japan, China, India, South Korea and South Asia. In February 2024 the bank’s long-term ratings were “A3” and “A-” from Moody’s and Fitch, respectively, while short-term ratings were “P2” and “F2”. As of January 2024 its market capitalisation was $1.3bn. Doha Bank’s 2023 results showed total assets of QR101.3bn ($27.8bn), up from QR97.6bn ($26.8bn) at the end of 2022. Profit for the year was up slightly, from QR765.4m ($210.1m) to QR769.5m ($211.2m), while the bank’s CET-1 ratio stood at nearly 13%, its tier 1 capital ratio was over 18% and total CAR was at 19.3%. All these ratios were slightly lower than at the end of 2022, but still above Basel III requirements.
Islamic Banks
QIB, Qatar’s first sharia-compliant bank, holds the largest market capitalisation in the Islamic segment as of early 2024. With a 10% share of total banking sector assets, QIB operates 23 branches within Qatar and launched a UK subsidiary, QIB UK, in 2008. Offering a variety of sharia-compliant investment and finance services, including QI nvest and Al Jazeera Finance, the bank maintained long-term and short-term credit ratings of “Aa3” and “P1”, respectively, by Moody’s as of June 2023, and “P1” and “F2”, respectively, by Fitch as of March 2024. QIB’s total assets at the end of 2023 were QR189.2bn ($51.9bn), up from QR184bn ($50.5bn) in 2022, with profits reaching QR4.3bn ($1.2bn), rising from QR4bn ($1.1bn) the previous year. The bank’s CET-1 ratio stands at 16.4%, and total CAR at 20.4%.
Established in 2006, Lusail-based Masraf Al Ryan offers retail, wholesale and private banking services across 17 branches and expanded its depositor base by acquiring Al Khaliji Commercial Bank in 2021. Major shareholders include the QIA and the Qatari Armed Forces Investment Portfolio. The bank was rated “Aa3” for the long term and “P1” for the short term by Moody’s as of April 2023. Despite reporting total assets of QR164.2bn ($45.1bn) at the end of 2023, down from QR167.5bn ($46bn) in 2022, profits rose from QR1.4bn ($384.3m) to QR1.5bn ($411.7m) over the same period. The bank’s CET-1 Ratio stood at 20%, its tier 1 capital at nearly 21% and its total CAR at 21.8% at the end of 2023.
Dukhan Bank is the third-largest Islamic bank in Qatar as of the first quarter of 2024 in terms of market capitalisation. The bank was formerly Barwa Bank, founded in 2008, and rebranded to Dukhan Bank in October 2020 after Barwa merged with International Bank of Qatar in April 2019. The bank offers a full suite of sharia-compliant services, including retail and wholesale banking, investment and asset management.
As of June 2023 Moody’s assigned the bank ratings of “A1” for the long term and “P1” for the short term. In February 2024 Fitch gave the bank “A-” rating for the long term and “P2” for the short term. The bank reported total assets of QR114.4bn ($31.4bn) for 2023, up from QR106.3bn ($29.2bn) in 2022, with annual profits increasing from QR1.25bn ($343.1m) to QR1.30bn ($356.8m). The CET-1 ratio stood at 14%, the tier 1 ratio at 16.3% and the total CAR at 17.2%.
QIIB is a private bank offering personal and corporate sharia-compliant services. According to Fitch, the bank had a 12% share of Qatar’s Islamic banking assets in September 2023, which equalled 3% of total banking sector assets. The QIA was the largest shareholder, with a 17% stake. The June 2023 long-term rating and short-term rating were “A1” and “P1”, respectively, while as of March 2024 the long- and short-term ratings from Moody’s were “A” and “F1”, respectively. The bank reported total assets of QR61.6bn ($16.9bn), up from QR56.4bn ($15.5bn) at the end of 2022, while yearly profits went from QR1.1bn ($301.9m) to QR1.2bn ($329.4m) over the 12 months. QIIB’s CET-1 ratio was nearly 11.9% at the end of 2023, and its CAR was 17%.
The sole investment bank listed on the QSE is Lesha Bank, which facilitates sharia-compliant investment. Its primary area of activity has been in real estate – residential, commercial and industrial – particularly in the US. Private banking, and equity and corporate banking are also part of its service offering.
The Qatari banking sector is also home to several foreign banks. These include UAE-based Mashreq Bank, UK-headquartered HSBC Middle East, Bahrain’s BNP Paribas Middle East and Africa, Standard Chartered Qatar, United Bank and Bank Saderat Iran-Qatar.
Performance
In recent years Qatar has faced significant global economic challenges, notably due to the Covid-19 pandemic. The country entered that crisis under blockade by some of its neighbours, with restrictions on trade not lifted until the start of 2021. Meanwhile, the Qatari government moved to ameliorate the impact of this and the pandemic with a QR75bn ($20.6bn) support package. This included the QCB setting a repurchase (repo) rate of 0% for commercial banks, boosting liquidity and assisting badly affected sectors with their loan repayments. The QCB rate on deposits (QCBDR) and repo rate was also reduced from 1.5% to 1% and on loans (QCBLR) from 3.5% to 2.5%. At the same time, the QDB started a QR5bn ($1.4bn) credit guarantee scheme for SMEs, and real estate and utility companies gave rent and utility bill waivers.
As the pandemic weakened, these measures began to be unwound, with the build-up to the 2022 FIFA World Cup, held in Qatar in November-December 2022, offering a welcome boost to the local economy. Indeed, this went hand in hand with rising oil and gas prices, which had slumped in 2020, boosting Qatar’s economy further. For the country’s banks, this period saw asset and deposit growth, along with expanded profitability and credit. In December 2021 total assets for commercial banks stood at QR1.8trn ($494bn), according to the QCB, up from QR1.7trn ($466.6bn) at the end of 2020.
Global Tensions
However, the conflict in Ukraine starting in February 2022 resulted in a series of major global supply chain challenges, exacerbating already rising inflationary pressures. With the Qatari riyal pegged to the US dollar, the currency saw a number of rate rises as the US and other countries tried to rein in inflation.
This period of monetary tightening continued in 2023, as the US Federal Reserve continued to hike rates, with the repo rate standing at 5.4% as of the end of March 2024, the QCBDR at 5.75% and the QCBLR at 6.25%. It subsequently held rates at a 22-year high level, although by February 2024 it was widely expected that rates would come down by around 1% during the year, meaning Qatari rates should also decline in tandem.
The banking system ended 2022 with net domestic assets totalling around QR943.3bn ($258.9bn). Total credit advanced stood at QR1.3trn ($356.8bn) and total deposits were QR999.1bn ($274.2bn), of which QR806.6bn ($221.4bn) were domestic. Net earnings jumped by 22% over the year, according to consultancy firm EY, driven by a boost in liquefied natural gas prices.
With commercial bank’s net foreign assets position standing at negative QR465.3bn ($127.7bn) at the end of 2021, in the spring of 2022 the QCB took steps to reduce the sector’s exposure to short-term, foreign exchange (FX) non-resident deposits. These measures included the QCB adjusting its FX reserve requirements and the adoption of a more conservative set of assumptions in its calculations. The result was foreign exposure falling rapidly, with the net foreign asset position of the commercial banks reaching a negative QR385.1bn ($105.7bn) by December 2023. Assisting with this was a decline in demand for credit as the economy became more buoyed by hydrocarbons receipts and the impact of the 2022 FIFA World Cup. The level of bank exposure to foreign liabilities remains high, however, with this continuing to be monitored closely by the QCB into 2024.
Post-FIFA World Cup, concerns have arisen regarding potential slowdowns in real estate and construction activities, which experienced significant growth during the decade leading up to the tournament. In 2023 real estate and contractors comprised approximately 20% of the bank lending and credit supply, as reported by the IMF. Despite a rise in the non-performing loan ratio to 3.8% in the second quarter of 2023, attributed in part to post-pandemic restructuring, Qatari banks remain heavily provisioned, poised to navigate turbulence. Supported by the Qatari authorities, particularly with the participation of the QIA and other state-linked entities in bank ownership, Qatari banks are well-equipped to manage these challenges throughout 2024.
Outlook
The IMF predicts 3.1% global economic growth in 2024, rising to 3.2% in 2025. Locally, the fund sees a return-to-normal expansion – 1.6% real GDP growth for 2023, followed by 1.9% for 2024. Qatar’s banks will therefore operate in a wider atmosphere of steady growth, albeit against a backdrop of continuing global instability and climate risk.
Banks that have thrived under high interest rates are poised to maintain their success, given the anticipated gradual easing of US monetary policy. Consolidation within the sector is expected to persist, characterised by smaller banks pursuing mergers, or specialisation to effectively compete with larger counterparts in both retail and wholesale banking arenas. Additionally, Islamic banking is anticipated to sustain its strong growth trajectory, while all banks will actively pursue opportunities for overseas partnerships and ventures.
Furthermore, the implementation of NDS-3 and the financial sector strategy will drive a sharper focus within the industry, coupled with renewed efforts to engage SMEs and enhance private sector lending. The fintech, segment will continue to prosper, backed by new QCB regulations and the ever-quickening pace of digitisation.
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