Qatar: With banks looking to navigate through pandemic-driven difficulties toward economic recovery and stability, KPMG published the eighth edition of its GCC listed banks’ results. Titled ‘Cautious optimism’, the report offers a thorough analysis of the financial results and key performance indicators (KPIs) of leading listed commercial banks in the region, in comparison with the previous year, to highlight the main financial trends in the GCC countries.
Speaking about the report, Omar Mahmood, Head of Financial Services, KPMG in the Middle East, South Asia, and Caspian Region and Partner, KPMG in Qatar, said, ‘’Listed banks in the GCC region continued their post-COVID recovery with strong double-digit asset while maintaining a conservative approach to credit provisioning, tight cost control and healthy capital levels, amid a future outlook based on cautious optimism.’’
Out of all the GCC nations, Qatar had the lowest cost-to-income ratio (22.8 percent) and the highest coverage ratio on stage 3 loans (91.6 percent), with Qatar National Bank being the largest bank by assets in the region at USD 327bn.
The following salient findings emerged from the financial results’ analysis for the year-ended 31 December 2022 for the GCC region as a whole:
- Profitability saw another double-digit increase of 25.3 percent, driven particularly by a growth in loan books, increased interest margins, lower loan impairment and a continued focus on cost efficiencies.
- Asset growth remained robust as banks increased their asset base by 9.9 percent, which was driven by lending to high quality customers.
- Net interest margins increased by 0.2 percent, as a result of the rising interest rate environment, which helped drive profit growth.
- The overall NPL ratio for the GCC banking sector decreased by 0.1 percent and now stands at 3.8 percent, reflecting the conservative approach to credit risk management.
- Net impairment charges on loans and advances decreased by an average of 11.2 percent, with the drop observed mainly in stage 2 and 3 portfolios, indicating an improvement in credit quality.
- ROA (1.3 percent in 2022) increased by 0.2 percent compared with the prior year, owing to the rise in profitability being higher than the asset growth.
- Cost-to-income ratios reduced compared to 2021 (40.9 percent to 39.9 percent), reflecting the continued focus on cost reductions and operating efficiency initiatives.
- The average coverage ratio for stage 2 and 3 loans increased by 0.4 percent and 1.7 percent respectively from the prior year, demonstrating how banks continue to be cautious in relation to their approach to provisioning.
- Share prices overall remained stable year on year with a marginal increase of 0.7 percent compared with the previous year.
The report also highlighted a 1.2-percent decrease in return on equity (ROE), compared to 2021, as equity growth outpaced profitability increases. Dividend payout ratio in the region also witnessed a near-identical drop of about 1.3 percent as banks looked to safeguard their earnings to further bolster equity positions and support future growth. According to the report, banks continued extending adequate coverage for their performing loan book as stage 1 net provision charges grew six-fold compared to 2021. Furthermore, while well above the minimum regulatory requirements across all GCC countries, the average sector capital adequacy ratio dipped marginally (0.3 percent) to reach 18.6 percent.
The GCC listed banks’ results anticipates banking sector in the region to continue its pursuit of building on its strong foundation, aided by a robust economic environment. As banks in the region aim to look past the COVID-19 crisis, it is expected that accelerated innovation plans, technology focus and continued government investment will witness further growth in the future.
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Manager, Marketing and Communications
KPMG in Qatar
About Omar Mahmood:
Omar has worked in the Middle East and the UK for many clients with local and global operations. He is the Head of Financial Services for KPMG in the Middle East, South Asia & Caspian region. Omar works closely with Qatar’s banks and regulators, advising them on emerging issues, industry trends and regulatory changes.
KPMG is a global organization of independent professional services firms providing audit, tax and advisory services. It operates in 145 countries and territories, and has more than 226,882 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee.
KPMG in Qatar belongs to a network of independent member firms affiliated with KPMG International. With over 226,882 professionals, led by over 10,908 partners worldwide, KPMG’s network allows it to bring together subject matter experts from around the globe to form international teams, with deep insights to tackle the most complex challenges.
KPMG has had a presence in Qatar for over 40 years. It opened for business here in 1978 and is now one of the largest and most established professional services firms in the country. Its 350+ professionals are led by 10 Qatar-based partners. KPMG in Qatar recruits the best and brightest from around the world and currently employs over 30 different nationalities. It works with some of Qatar’s largest public and private sector organizations across most of the country’s core industries. This provides a deep insight into the challenges and opportunities that its clients experience and a comprehensive understanding of how they can be assisted to respond to these issues.