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Qatari Banks Face Growing Risks of Asset Quality Deterioration

Qatari Banks Face Growing Risks of Asset Quality Deterioration

Friday, 17 May, 2019 - 09:30
A view of Doha Bank Tower (R) in Doha April 30, 2012. REUTERS/Mohammed Dabbous
London - Motleq Mounir
Fitch Ratings has affirmed that the main risks facing Qatari banks lay in the deterioration of assets’ quality, noting that the government support to the banks since the beginning of the Gulf crisis in June 2017 aimed to alleviate pressure on banking liquidity.

The risks vary among banks but Viability Ratings are not under immediate threat as they incorporate some allowance for expected deterioration in asset quality, said Fitch in a report on Thursday.

Once again, the Qatari banks are compelled to depend on local deposits – Fitch saw that Qatar should take other procedures to support the liquidity in case of another wave of deposit withdrawals occur.

“The public sector injected USD40 billion of funding in June-December 2017, mainly placements by the Central Bank, the Ministry of Finance and the Qatar Investment Authority,” it said.

“Government support to the banking system since the beginning of the Gulf crisis has eased pressure on liquidity but asset quality is coming under pressure from deterioration in the real estate market. Oversupply has reduced property prices and rentals, and payment delays in the contracting sector are rising,” it added. 

“We calculate that the highest problematic loans ratio among rated Qatari banks is about 10%… The risks vary among banks but Viability Ratings are not under immediate threat as they incorporate some allowance for expected deterioration in asset quality,” according to Fitch Ratings.

“Despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed,” it added.

Standard & Poor's has downgraded its long-term rating with a negative outlook.

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