Qatari banks post RoE of 13.7% in 2021, highest in GCC: KPMG

Qatar’s listed banks had the highest sector average for return on equity (RoE) of 13.7 percent against a GCC average of 11.3 percent in 2021, KPMG has a said in a report released on Monday.
According to KPMG’s seventh edition of its GCC listed banks’ results report for 2021, Qatar’s listed banks were the clear leaders amongst their GCC peers in terms of their cost-to-income ratios of 23.3 percent against a GCC average of 41.1 percent, demonstrating the success of tight cost control measures across the sector.
The report, which analyses the financial outcomes and key performance indicators for the leading listed commercial banks across the GCC as compared to the previous year, revealed that Qatar National Bank (QNB) continues to maintain the top spot for the largest bank in the GCC in terms of assets.
Non-performing loan coverage ratio was also highest amongst Qatari banks with 92 percent against a GCC average of 66 percent, the
report said.
The report, however, said that Qatar was also the only GCC country to report an increase of 19.2 percent in the average net provision charge against a GCC average decline of 14.5 percent, reflecting a continued cautious approach amidst a challenging credit environment.
The report titled ‘A new reality’ highlights some of the major financial trends identified in the banking sector across the region.
Commenting on some of the significant trends concerning the GCC banking sector, KPMG in Qatar Partner Omar Mahmood, who is also the head of financial services for KPMG in the Middle East and South Asia, said, “The year 2021 was a redefining year for banks in the GCC. The banks emerged more resilient from an unprecedented year impacted by COVID-19, witnessing improved profitability, a greater focus on digital transformation, ESG gaining prominence, and agile working becoming the norm.”
Mahmood said, “GCC banks have rebounded after a difficult year courtesy of proactive balance sheet management backed by effective government support. This had cast a strong foundation for future growth while also being prepared to withstand the current and continued challenges and threats posed by the global economic conditions.”
Key highlights from the report are a 35.8 percent increase in profitability, after a double-digit dip in 2020, which was primarily due to reduced cost of funds and lower loans provisioning by 14.5 percent. Market sentiment also followed the fundamentals with a 36.6 percent rise in listed bank share prices. There was a noted improvement across numerous key financial metrics with a robust asset growth of 6.4 percent to $2.6 trillion, ROE and ROA improving by 0.3 percent and 2.8 percent respectively, an increase in the capital adequacy ratios to a sector average of 19 percent and a cost reduction in the cost-to-income ratio by 0.3 percent.
The report also presents a forward-looking view of ‘A new reality’ being established with six key themes for the GCC banking sector.
According to the report, lending is expected to be cautious and selective as banks focus on quality while effectively managing their NPLs and loan impairment across all sectors of the economy.
Costs are expected to decline further as the effects of digital investment and consolidation come to fruition. Digital transformation will most likely continue as technology and innovation become business as usual and as banks embrace disruptive trends. ESG is likely to remain a front-and-centre focus for investors, regulators, banks, and customers. The rising interest rate environment and effective NPL management are likely to help drive profitability and growth.
Lastly, the report said, “We see a robust economic environment, fueled by higher oil prices, that could help to stabilize any potential credit volatility and continue to support a resilient GCC banking sector.”
Overall, the report said, GCC banks emerged more resilient despite a challenging year.