S&P forecasts lower profitability for Qatar banks

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Standard & Poor’s (S&P) Ratings Services said in a report released today that it anticipates tightening liquidity, slackening credit growth and weakening profitability for Qatar’s banks in 2016.

“Although the drop in hydrocarbon prices and the Qatari government’s streamlining of its public investment program are putting the brakes on the domestic economy, banks’ asset quality held generally steady while credit growth remained resilient on the back of strong private sector activity in 2015,” S&P said in a statement. “Nevertheless, as liquidity in the banking sector tightens further with the rise of local and global interest rates, we expect credit growth will lose some steam.”

In 2015, the Qatari public sector withdrew some of its deposits from the domestic banking system in the process. S&P said it expected more of the same in 2016 and expectged a further squeeze on banks’ liquidity.

“(W)e foresee some tension on banks’ asset quality,” said S&P’s credit analyst Nadim Amatouri. “Over the past few years, public-sector lending took a back seat, while a visible portion of new lending was in the private sector. We now anticipate increased credit losses in the private sector, particularly given our expectations for slowing real GDP growth.”