BANKS: Qatar outlook stable as infrastructure spending drives growth

The outlook for Qatar's banking system remains stable as continued spending on the country's infrastructure projects will drive modest economic growth and support lending, Moody's Investors Service said in a report.

"Higher oil prices have improved government finances and supported spending on infrastructure, including preparations for the 2022 FIFA World Cup," said Nitish Bhojnagarwala, VP-Senior Credit Officer at Moody's.

"Banks' sound profitability, capital and liquidity should stay broadly stable, even as problem loans increase slightly because of continued challenges in the construction, contracting and real estate sectors."

Moody's said it expects problem loans to increase to 2.4% of total loans by June 2020 from 2.1% at the end of 2018, while Qatar's real GDP rises 2.1% in 2019 and 2.2% in 2020, driven mainly by growth in the non-hydrocarbon sector of the economy.

Banks' return on assets will remain broadly stable at around 1.5% going into 2020. The rating agency expects pressure on interest margins to moderate because liquidity pressures have eased and the global trend of rising interest rates has reversed.

Additionally, the banks have re-priced their loan books at higher interest rates. Loan-loss provisioning needs will also stabilise and banks will continue to contain costs, Moody’s said.