Qatari banks are likely to witness poor earnings growth as their net interest margins continue to be squeezed by the cost of funds, according to SICO Investment Bank’s quarterly results preview of GCC equities.
In the report, it said net interest margins would continue to face pressure with the cost of funds – the interest rate paid by financial institutions for the funds that they deployed - edging upwards in 2013 fourth quarter.
The bellwether Industries Qatar (IQ) was expected to deliver a flat year-on-year performance – mainly as a result of weak fertiliser prices.
It said Commercial Bank of Qatar (CBQ) and Qatar Islamic Bank (QIB) were expected to see higher provisioning charges caused by a rise in real-estate impaired loans, while Doha Bank’s higher net interest income year on year was expected to drive earnings.
However, Qatar National Bank’s strong balance sheet growth will continue, the research note said.
The report said IQ’s revenue was projected to grow 12 percent year-on-year and 11 percent quarter-on-quarter. Net profit was projected to increase seven percent year-on-year and eight percent quarter-on-quarter.
Meanwhile, GCC-listed companies that were covered by QIB were expected to report 22 percent year-on-year earnings growth, while remaining flat on a quarter-on-quarter basis.
SICO said it expected banks in Saudi Arabia to continue to report strong double digit growth, while UAE banks should witness modest lending growth as a result of limited corporate borrowing, while provisioning was expected to remain at elevated levels.
Meanwhile, INVEST AD, the Abu Dhabi-based Investment Company, said in its markets outlook that fourth-quarter earnings results were likely to be the main drivers of performance in Gulf markets in coming weeks, with dividend pay-outs also important given the predominance of retail investors in the region.
Investors will also be closely watching the announcement of federal budgets for 2014. Qatar’s recent announcement of a series of huge infrastructure projects was an early sign of the likely revival of projects in the country, it said.
“The pace of the US Federal Reserve’s ‘tapering’ in the coming year is likely to impact emerging market and frontier market sentiment, but investors in the Gulf are in a cautiously optimistic mode for now,” INVEST AD said.For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.