Moody's upbeat on Qatar banking system

Rating agency says outlook stable, banks boosted by Gulf state's economic growth.
Moody's upbeat on Qatar banking system
By Andy Sambidge
Thu 29 Apr 2010 07:30 AM

Moody's Investors Service has said the outlook for Qatar's banking system is stable, based on the country's continuing macroeconomic growth. "For 2010, Moody's expects Qatari banks' pre-provision profitability to remain at good levels and to be supported by higher business volumes and a low cost base," said Elena Panayiotou, lead analyst for Qatari banks in Moody's Limassol office.

However, the banks' net profitability is likely to continue to be affected by elevated provisioning expenses, she added.

"The current ratings of Qatari banks are supported by continued high levels of pre-provision profits, strong capital levels and a high loss-absorption capacity," said Panayiotou.

However, Moody's added that during 2009 the banks' credit quality fundamentals deteriorated largely due to elevated credit losses in their consumer lending portfolios and the loans that were extended to the construction and the real estate sector.

Taken together, Moody's estimates that the banks' non-performing loans grew by around 140 percent during 2009, resulting in reduced profits for most Qatari banks.

Despite the modest slowdown in GDP growth in 2009, Qatar's economy continued to expand at a strong rate, with GDP growth expected to have reached 11.4 percent in 2009 (compared to 15.8 percent in 2008).

For 2010-2011, Moody's said it expects the Qatari economy to expand at a rate of around 16 percent, mostly due to increased hydrocarbon production and elevated oil prices.

While the banks' business expansion slowed down in 2009 in line with the global downturn and the resulting greater caution towards lending, Moody's said it expected 2010 growth rates to gradually return to pre-crisis levels.

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