Qatar’s banking sector total assets declined by 2% month-on-month (MoM) and by 1.9% year-to-date (YTD) in July to QR1.86tn ($510bn), according to a report by QNB Financial Services (QNBFS). The report attributed the drop in assets to a fall in both domestic and foreign assets, as well as a decline in both loans and deposits with banks in Qatar.
Public sector loans drag down credit growth
The report said that loans went down by 0.9% MoM and by 0.9% YTD in July to QR1.24tn ($340bn). The decline in loans was mainly due to a fall by 1.9% in the public sector and 0.5% in the private sector. The public sector loans were affected by a sharp drop of 27.7% in the semi-government institutions segment, which offset the growth of 1.3% in the government institutions segment. The government segment, which represents 28% of public sector loans, also decreased by 2.9% MoM and by 14.1% YTD.
The report noted that loan provisions to gross loans stood at 3.8% for both June and July, indicating a stable asset quality for the banking sector.
Deposits fall as government withdraws funds
The report also said that deposits fell by 2.9% MoM and by 7.1% YTD in July to QR927.8bn ($254bn). The decline in deposits was mainly due to a fall by 7.1% in public sector deposits, which accounted for 31% of total deposits. The report suggested that the government may have used its deposits to repay its external and domestic debt, as the public budget statement for the second quarter of 2023 showed that QR12.5bn ($3.4bn) were redeemed in external bonds and loans during the quarter.
The report added that the private sector deposits increased by 0.4% MoM and by 2.8% YTD, while the non-resident deposits decreased by 5.6% MoM and by 16.7% YTD.
As a result of the decline in deposits, the loans to deposits ratio (LDR) increased to 134.1% in July, compared to 131.5% in June.
Banking sector remains resilient despite challenges
Despite the decline in assets, loans and deposits, the report said that Qatar’s banking sector remains resilient and well-capitalized, with liquid assets to total assets at 30.7% in July, compared to 31.1% in June.
The report also highlighted that Qatar’s banking sector has benefited from the recovery of the global economy and the easing of Covid-19 restrictions, as well as the ongoing preparations for hosting the FIFA World Cup 2023.
The report concluded that Qatar’s banking sector is expected to maintain its profitability and growth prospects, supported by the government’s fiscal stimulus measures and the diversification of the economy.
