Qatari banks net profit is resilient in 2020

Qatari banks resist pandemic's impact on 2020 performance. Net profit is resilient despite higher provisioning charges and pressure on asset yields.

Aggregate profitability weakened marginally in 2020. The aggregate return on assets was 1.2 per cent, compared with 1.4 per cent in 2019. The banks’ combined net profit declined 12 per cent year-over-year to QAR20.4 billion.

According to Moody rating agency, Qatari banks’ income-generating ability remains strong despite higher provisioning charges related to the pandemic. This reflects the Qatari government’s significant footprint in domestic banks as a shareholder, depositor and customer, which to some extent insulates the banking sector from external events.

Five of the eight banks reported lower net profit. The decline in bottom-line profitability mainly reflected higher pandemic-related provisioning, which was partly offset by cost savings and higher net interest income.

Moody’s expect Qatar’s real GDP to grow by 1.7 per cent in 2021 after contracting by 3.5 per cent in 2020 because of the coronavirus pandemic and decline in oil prices.

Nitish Bhojnagarwala, Vice President – Senior Credit Officer at Moody’s Investors Service said, “We expect bottom-line profitability [of Qatari banks] to remain at the same level in 2021 in the context of slow economic activity, though it will remain relatively strong compared with regional and global peers.”