(MENAFN- The Peninsula) By Satish Kanady I The Peninsula
Qatar banks were quick to respond to the COVID-19 crisis with the proactive regulatory and state level support.
The banks introduced several measures such as cost reduction initiatives, process rationalization, and enablement of digital channels and increased their focus on core banking activities which are proving quite effective when it comes to containing the impact of COVID-19 on their books.
KPMG noted in its second edition of their annual ‘Qatar banking perspectives' released yesterday that the standing of Qatar's banks in the market remains firm. Despite the challenges, banks continue to demonstrate resilience, as evidenced by the positive first quarter results and encouraging statements from rating agencies. However, KPMG added, that there are some headwinds.
Those banks that are agile, flexible and willing to transform their business models will be the ones that succeed and secure their financial strength for future growth, while those that rest on their laurels will be left behind.
Omar Mahmood, head of Financial Services for KPMG in the Middle East & South Asia, and partner at KPMG in Qatar, commented, 'The standing of Qatar's banks in the international market remains firm, with the sector remaining in a strong position, regardless of potential geopolitical uncertainty.
Commenting on the findings in the report, Mahmood added that, 'It remains to be seen whether banking will respond in a way that amplifies or dampens the acute economic challenge, however from what we have seen in the past few months, banks have been quick to respond to the crisis with proactive regulatory and state level support.
The global pandemic situation has signaled banks in Qatar to accelerate their digital transformation agenda and embrace new Fintech strategies thus enabling them to develop products and services that meet existing and everchanging customer and regulatory requirements, overcome current market challenges, while building resilient systems and enhancing operational efficiencies.
The COVID-19 pandemic and its subsequent impact on customer expectations, banking channels and ways of working has accelerated the Digital Transformation agenda of banks operating in Qatar.
With the creation of the Qatar Fintech Hub and the finalization of the strategy and regulatory framework that will support its deployment, innovative initiatives will thrive in the coming years.
Other developments such as the implementation of a Microsoft cloud hub in Qatar will accelerate such initiatives by providing them with the infrastructure needed to launch their services quickly and in a costeffective manner. The banking sector in Qatar needs to ride the technology wave and embrace new Fintech strategies that can help them enhance their overall customer experience, increase process efficiencies and comply with the ever-changing regulations.
2019-2020 has been a challenging year for banks operating in Qatar, however, the overall impact is expected to be cushioned by the resilience and strength of the banking system. As of 31-Mar-2020, net profit attributable to shareholders registered a nominal decrease of 0.1 percent when compared with previous year's net profit as a result of increased provisions, while total assets registered a growth of 1.8 percent to QR1,654bn when compared with results as of previous year.
For banks to be able to continue serving customers while complying with lock down and social distancing rules, their business operating model needs to be robust and flexible.
Banks with well-defined digital identity and e-channels are finding it comparatively easier to adapt to the new ways of operating. On the liquidity management challenge, KPMG experts noted that while some companies might be able to maintain adequate headroom making drawdowns on their revolving credit facilities, others will find that they need to approach banks to arrange covenant waivers or limit increases.
Companies will need to be proactive and recognize early signals of any commercial and financial distress thereby requiring the need for initiating financial restructuring. KPMG said that Qatar needs to follow a prudent real estate credit policy by sticking to the fundamentals of credit allocation, especially in light of the softening in the real estate market.
Although Qatar's credit allocation towards real estate seems reasonable compared to regional peers, it is still material and demands strict vigilance on an ongoing basis. The report is based on empirical analyses focusing on the challenges and opportunities within the banking sector.
Carried out by KPMG's diligent financial services function, the second edition covers a broad scope of topics, spanning from culture and governance, cybersecurity, and banking regulations; to the role of artificial intelligence in banking and the current trends in Islamic finance.
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