Fitch places six GCC banks on rating watch negative

The six banks are Qatar International Islamic Bank, Dukhan Bank, Doha Bank, Al Khaliji Bank, Qatar Islamic Bank and Ahli Bank Qatar

  
Hands of bank officer calculating loans. Image used for illustrative purpose.

Hands of bank officer calculating loans. Image used for illustrative purpose.

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CAIRO: Excessive reliance on external funding in the Qatari banking sector has prompted Fitch Ratings to place six Qatari banks on Rating Watch Negative.

This means that the ratings agency has a negative outlook for the banks and might decrease their current credit ratings in the near future.

The six banks are Qatar International Islamic Bank, Dukhan Bank, Doha Bank, Al Khaliji Bank, Qatar Islamic Bank and Ahli Bank Qatar.

Fitch said that non-resident funding in the country’s banking system reached $193 billion at the end of August, which was 48 percent of the sector’s liabilities — compared with $121 billion and 38 percent at the end of 2018.

At the same time, foreign assets held by the banks remained relatively stable.

Both of these developments led the net external debt to jump to a significant $133 billion, or 82 percent of the gross domestic product forecast for 2021. It was much lower at the end of 2018 — at $57 billion, or 38 percent of the GDP, Fitch added.

Moreover, total assets of the banking system leapt from 212 percent of GDP at the end of 2018 to 302 percent of forecast 2021 GDP.

Fitch explained that this outcome, along with the excessive external funding, could hamper the authorities’ ability to support the banking sector in case of hardships.

In a previous report released by S&P Global Ratings on GCC countries’ banking systems, only Bahrain — aside from Qatar — exceeded the 10-percent mark for the net external debt/system-wide loans ratio. Other countries even reported negative values.

This is a sign that the majority of banks in the region were mainly depending on core customer deposits not external funding, unlike Qatari banks.

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