Qatar banks report strongest credit extension growth in GCC, says Kamco Invest

(MENAFN- Gulf Times) The domestic economic revival helped the banks in Qatar report strongest growth in credit extension within the Gulf Co-operation Council (GCC) region, according to Kamco Invest, a Kuwait-based leading investment entity.

Data on credit facility by sector for the six GCC countries showed mixed trends. However, the trends in Qatar and Saudi Arabia showed "strong" growth backed by economic revival, Kamco said in its latest report.

According to the data, total credit facilities increased by 8.6% during 2020 to QR1.13tn and lending during the first two months of 2021 has risen by 2.4%, it said, adding lending to the public sector, general trade, contractors and the services sector reported double digit growth in 2020 whereas decline was seen in smaller economic sectors including industry and others.

The aggregate net loan growth during the fourth quarter (Q4) of 2020 stood at 1.4% quarter-on-quarter for the GCC banking sector to reach $1.54tn led by a broad-based growth seen in most markets in the GCC.

"Qatari banks reported the biggest quarter-on-quarter increase in net loans during Q4-2020 with a growth of 2.5% followed by Saudi and Bahraini banks that clocked growth rate of 2.2%," Kamco said.

The latest data from the Planning and Statistics Authority suggest that on a nominal basis (at current prices), Qatar's GDP or gross domestic product is estimated to have shot up 7.4% quarter-on-quarter but plummeted 14.4% year-on-year at the end of Q4 2020.

The hydrocarbons saw a 15.7% surge on a quarterly basis while it fell 28.9% on yearly basis and in the case of non-hydrocarbons, the sector saw a 4.4% jump quarter-on-quarter, while it declined 6.8% on a yearly basis in the review period.

The aggregate loan-to-deposit ratio for the GCC banking sector regained the 80% mark at the end of 2020 to reach 80.1%, resulting in a growth of 80 bps as compared to the third quarter of 2020.

However, unlike the previous quarter when the ratio improved in Saudi Arabia and Qatar, the ratio declined marginally in Saudi Arabia by 60 basis points to reach 79.1% and by 90 basis points in Qatar to reach 91.1% during Q4-2020.

The total bank revenue for the GCC banks rose by a healthy 4% on a quarterly basis during Q4-2020 after seeing a 2.2% decline the previous quarter, it said, adding the increase was supported by both higher net interest income as well as non-interest income.

Kamco highlighted that the non-interest income grew for the second consecutive quarter during Q4-2020 increasing by 8.9% quarter-on-quarter, the biggest sequential growth in last five quarters, to reach $6.4bn.

"The increase was broad-based and witnessed in all the six countries mainly led by improving capital markets during the last quarter of the year," the report said.

The net interest income increased modestly at 2.1% to reach $15.1bn during Q4-2020 against $14.7bn the previous quarter. The quarterly growth was positive in almost all the markets, barring in Bahrain, and came mainly on the back of lending growth boosted by economic recovery post the pandemic.

Nevertheless, the growth in net interest income during Q4-20 "failed to have a positive" impact on aggregate net interest margins (NIM) as the interest rates declined across the board, according to Kamco Invest.

The aggregate NIM for the GCC banking sector contracted to 2.9% in Q4-2020 compared to 2.98% the previous quarter, mainly led by a relatively higher growth in earning assets during the quarter.

NIM has seen marginal but consistent declines over the last eight quarters and went below the 3% mark for the first time in the third quarter of 2020.

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