Browsing 'banks' News

Omar Chatriwala / Doha News

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Concerned about the ongoing Gulf dispute and the slowing growth of Qatar’s banks, credit agency Moody’s has downgraded its outlook for the country’s financial system.

Qatar’s banks now have a negative outlook, instead of a stable one.

This reflects “Moody’s expectation of how bank creditworthiness will evolve in Qatar over the next 12-18 months,” the agency said.

QNA

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The news will likely put pressure on Qatar to seek a speedier resolution to the crisis with its neighbors, which is now in its third month.

The dispute with Saudi Arabia, the UAE, Egypt and Bahrain is currently at an impasse, with no side willing to make any concessions.

According to Moody’s, Qatar’s bank profitability will only continue to decline if the crisis continues.

What’s going on

One of the biggest factors affecting the latest rating is investor sentiment.

Confidence in Qatar’s banks has dropped due to lower global oil prices and an overall economic slowdown, Moody’s said.

It forecasted Qatar’s GDP to be 2.4 percent this year, down significantly from the 13.3 percent rate seen during the blockbuster growth years of 2006-2014.

“However, (Qatar’s GDP) remains the highest in the GCC, driven by high levels of government spending in preparation for the FIFA World Cup in 2022,” Moody’s added.

Still, a prolonged dispute could hurt bank liquidity, which is already tight due to reduced energy revenues, it said.

Pixabay

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Notably, Qatar’s banking sector isn’t the only one suffering from the Gulf dispute.

Earlier this week, a major lender warned that a prolonged boycott could hurt Dubai’s status as a regional financial hub.

This is because the dispute puts international banks in a difficult position, Standard Chartered CEO Bill Winters told Reuters.

“There is a risk of turning away from the UAE,” he added.

Working toward dialogue

As pressure builds to come to a resolution, both Kuwait and the US stepped up efforts to mediate the dispute.

This week, two American envoys have been sent to the region to speak to officials about opening up direct negotiations between Qatar and its neighbors.

Kuwait is also trying to hammer out “a set of measures” to help jumpstart dialogue between the nations, Gulf News reports.

Thoughts?

Duncan Smith/Corbis

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All banks and financial institutions in the country will be closed this Sunday (March 5) for their annual “bank holiday.”

Exchanges, banks and investment and financial companies will reopen to the public on Monday, March 6, the Qatar Central Bank said.

According to QNA, the closure is part of legislation that stipulates the first Sunday of March each year shall be an official holiday for all banks and financial institutions operating in Qatar.

Thoughts?

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Christian Senger/Flickr

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Commercial banks in Qatar are lending less and can expect slower growth in the coming two years due to the collapse in global oil prices, a new report has warned.

The hydrocarbon slump and resulting economic slowdown have led Qatari companies and households to spend more conservatively in recent months.

Conditions are expected to improve as oil prices slowly rise in the coming years.

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Stewart Lacey/Flickr

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But banks should be prepared for a “more challenging operating environment,” a recent study from UK-based BMI Research said.

“We expect to see a gradual improvement in the situation for Qatari banks over the years, as oil prices recover moderately, but there is no getting back to the boom years of 2003-2012,” BMI’s country risk analyst for MENA Olivier Najar told the Gulf Times.

GDP growth slows

According to BMI, Qatar’s real gross domestic product (GDP) is forecast to continue to grow, but at a much slower rate than in recent years.

It said that GDP – which is seen as one of the main measures of a country’s economic health – will average around 3.5 percent in the coming two years. That’s compared to 8.7 percent between 2010 and 2015.

“As a result, Qatari banks will face fewer lending opportunities,” the report said.

This is expected to have a knock-on effect on local banks’ asset expansion.

BMI forecasts that growth in this arena will average some 9.6 percent until the end of 2018 – compared to 15.6 percent over the past five years.

Fewer loans

As a result of the tighter economic conditions, companies and individuals are borrowing less money than before.

Credit growth in trade, industry and consumption stood at 10.9 percent for the first six months of this year, compared to 25.7 percent for the same period last year, the report said.

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Chantelle D'mello

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But growth is accelerating in real estate, as developers boost their tourism investments ahead of the 2022 World Cup.

Qatar is expanding the number of hotels and apartment-hotels in the coming six years.

Just by the end of 2018, the number of rooms is expected to grow by more than 7,000 – to 23,567.

However, this is not going to be enough to off-set the slowdown in other sectors, BMI said.

Bailout

Instead, the country’s banks will likely be bailed out by public sector borrowing, though BMI warned against this strategy:

“Diversification into the public sector will erode profitability for commercial banks in Qatar,” it said.

The report added that the interest rate on government securities is less than that required for private sector loans.

Thoughts?