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2022 FIFA WC to boost banks’ performance in Qatar: Moody’s

2022 FIFA WC to boost banks’ performance in Qatar: Moody’s

Satyendra Pathak
Increased government spending supported by current oil prices and the upcoming 2022 Fifa World Cup will underpin banks’ stable financial performance in Qatar, Moody’s Investors Service has said in a report released on Wednesday.
According to the report, a return to rising oil production after production cuts in 2017-2018 will drive real GDP growth in GCC countries including Qatar next year to an average of around 3.3 percent from 1 percent in 2017, easing fiscal pressures as well as keep government spending plans on track.
Moody’s report entitled ‘Banks – Gulf Cooperation Council 2019 Outlook’ expresses the rating agency’s expectation of how banks’ creditworthiness will evolve over the next 12 to 18 months in the GCC.
“Banks in Qatar, Kuwait, UAE, and Saudi Arabia will remain resilient, while fiscal pressures will weigh on banks in Oman and Bahrain, where oil prices will remain below the fiscal breakeven level,” the report said.
Governments’ willingness to support GCC banks remains high and their capacity to support is strong, the report said.
“Credit growth will recover as government spending underpins economic activity and spurs private-sector growth. Lending growth in 2019 will range from 4 percent to 6 percent in different GCC countries. Lending to construction and real-estate sectors will increase,” the report said.
The report, however, said that problems loans will continue to rise due to the lagging effect of the economic slowdown in previous years.
Moody’s expects nonperforming loans (NPLs) in GCC banks to stand at a still good 3 percent of total loans at the end of 2019.
“GCC banks will continue to exhibit large loss absorption buffers against sudden asset quality deterioration and show resilience under our low probability stress scenarios. Capital will stay broadly stable, benefitting from modest credit growth and stable bottom-line profitability,” the report said.
Profitability pressures are expected to ease, with net income to tangible assets remaining strong at around 1.5 percent to 2.1 percent, the report said.
“Banks in GCC countries have adapted their cost base to the slowing economic environment, maintaining strong efficiency. Consolidation will ease competition and also alleviate some pressure on profitability,” the report said.
The US-based rating agency earlier this year had changed its outlook for Qatar’s banking system to stable from negative, reflecting the resilience of the country’s economy and banking system to the ongoing regional dispute, as well as the stable outlook on the government of Qatar’s Aa3 long-term issuer rating.
“The Qatari government has been able to rebalance the country’s economy following the regional dispute which began in June 2017, and the high level of government spending on infrastructure in preparation for the FIFA World Cup in 2022 has been unaffected,” the report said.


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