Fitch sees Qatar banks' impairment charges falling

Ratings agency says it expects environment for Qatar banking sector to continue to improve in 2011
Fitch sees Qatar banks' impairment charges falling
Fitch Ratings said on Sunday that it expects the environment for Qatari banks to continue to improve in 2011, with impairment charges having already peaked. (Bloomberg)
By Andy Sambidge
Sun 26 Jun 2011 06:48 PM

Fitch Ratings said on Sunday that it expects the environment for Qatari banks to continue to improve in 2011, with impairment charges having already peaked.

In a new report, the agency said its outlook for the banking sector in the Gulf state is stable.

The agency said it believes that impairment charges have probably peaked for most banks and are set to decline further this year.

Fitch added that there may be some scope for improvement in the banks' individual ratings in the medium term, assuming that asset quality is not undermined by rapid credit growth.

Qatar is set to be one of the world's fastest-growing economies as GDP is projected to grow by 19 percent in 2011 and 20 percent in 2012 driven by public sector projects and oil and gas revenues.

Fitch said the private sector and banks will benefit from future increases in government spending on infrastructure, healthcare, education and tourism projects under the Qatar National Development Strategy.

Retail profitability will probably be reduced by the April 2011 Qatar Central Bank circular, which has capped the maximum interest charge/Islamic profit at 6.5 percent.

Prior to the circular, the typical retail interest charge was 9%.

Fitch added that it expects a gradual change to bank financing and funding profiles following the QCB directive on Islamic operations of conventional banks.

Islamic banks in Qatar are expected to benefit significantly from inflows of new deposits. The directive allows for banks' existing Islamic financing and deposits to wind down over the existing financing terms or be sold to Islamic banks.

The agency said political and social instability had affected much of the Middle East and North Africa region since early 2011 but it did not expect to see unrest in Qatar which remains politically stable.

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