Govt support helps mitigate sector vulnerabilities for Qatari banks: S&P

September 27, 2021

Qatari government’s footprint in the economy and support measures helped reduce COVID-19’s effects on the country’s banking system, S&P Global Ratings has said in a report released on Sunday.
According to the report entitled ‘Government Support And Improving Economic Sentiment Help Mitigate Sector Vulnerabilities For GCC Banks’, the COVID-19 pandemic and last year’s oil price crash did not affect Qatar’s banking systems highlighting the country’s economic resilience.
Qatari government’s highly supportive stance toward its banking system and improving economic sentiment has helped mitigate sector vulnerabilities for Qatari banks, S&P said in the report.
S&P has said in the report that it expects Qatar’s subdued private sector to show signs of recovery. “Overall credit growth in Qatar’s private sector, at just under 5 percent over first-half 2021 excluding lending to the government but including other public sector entities, indicates much more subdued activity compared with 8 percent over the same period last year and an annual average growth rate of 14 percent over 2019–2020,”it said.
“Notable in this data is the brisk expansion in consumption lending, which has increased by the same amount as it did annually in 2019 and 2020, indicating that retail confidence has improved faster than corporate sentiment. However, we expect the latter will improve over the second half, with momentum behind a recovery building. We maintain our private sector growth estimate of about 8 percent for the year,” the report said.
“Qatar’s public sector accounts for at least one-third of total credit directly and more indirectly. Credit extended directly to the government increased to 15 percent of total credit at June 30, 2021, from just under 10 percent at June 30, 2020, and accounted for nearly 60 percent of total credit growth,” the report said.
“The government’s fiscal position remains solid, however, and public sector deposits in the system increased almost $8 billion to total about $80 billion in the first half of 2021, just shy of their 2017 boycott-related peak. Private sector deposits remained flat, meaning the public sector accounted for almost all domestic deposit growth,” the report said.
“We expect the government and wider public sector’s footprint will remain highly visible in the local economy, and that lending to the government will continue to account for a significant portion of total credit. Although this will help to contain NPL formation, the related margin is likely lower than when funding private sector activity. We view an increase in these overdraft facilities as less likely, following relative stability in the second quarter, and because we expect improving demand to support earnings,” it said.

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