The Banking Executive Magaizne - March 2025 Issue

Qatar Banks Qatar Banks LEAD GCC REGION WITH LOWEST COST-TO-INCOME, HIGHEST COVERAGE RATIOS Qatar banks continue to lead the re- gion with the lowest cost-to-income ratio at 25.6% and the highest cov- erage ratio for stage 3 loans at 85.1%, reflecting strong financial re- silience. In its ‘GCC listed banks’ results’ re- port, KPMG noted that in Qatar’s banking sector, Qatar National Bank’s position has been reaffirmed as the largest bank in the GCC by as- sets, reaching $356bn. The report highlights strong asset growth across GCC banks, supported by robust capital adequacy ratios. Profitability saw a notable increase, driven by higher interest margins and disciplined cost control, while net in- terest margins (NIMs) remained sta- ble despite economic fluctuations. Non-performing loan (NPL) ratios de- clined, reflecting prudent credit risk management, and cost-to-income ra- tios remained among the lowest globally, emphasisng continued op- erational efficiency. Investor confi- dence has also been reinforced, with bank share prices showing stability in a volatile market. Across the GCC, profitability in- creased by 10.5%, driven by loan book growth, stable interest margins, lower loan impairments, and ongo- ing cost-efficiency measures, KPMG noted. Total assets increased by 9.2%, sup- ported by lending to high-quality customers. While net interest mar- gins saw a slight dip of 0.1%, the overall NPL ratio improved, decreas- ing by 0.3% to 3.3%, signalling a continued conservative approach to credit risk management. Return on Assets (ROA) (1.5% in 2023) slightly increased by 0.04% compared to the previous year re- flecting stable profitability relative to asset growth. Cost-to-income ratios remained sta- ble compared to 2023 at 39%, re- flecting the continued focus on cost reductions and operating efficiency. Moreover, the average coverage ratio for stage 3 loans remained broadly in line with prior year at 67%, high- lighting the listed banks' cautious provisioning approach. Looking ahead, KPMG predicts that the GCC banking sector will con- tinue evolving with an increased focus on AI and automation to en- hance operational efficiencies, alongside the strengthening of ESG frameworks to embed sustainability within banking strategies. The rise of regulatory technology (RegTech) is expected to support compliance and risk management, while further in- dustry consolidation will likely foster stronger and more competitive finan- cial institutions. Additionally, balance sheet growth is projected to accelerate, driven by strategic investments and effective risk management, ensuring sustained financial stability and resilience. Omar Mahmood, Head of Financial Services for KPMG in the Middle East, South Asia, Caucasus and Cen- tral Asia, and partner at KPMG in Qatar, commented, "The GCC bank- ing sector remains a pillar of eco- nomic stability and growth, demonstrating resilience in the face of macroeconomic uncertainties. The sector’s ability to maintain strong capital positions, enhance asset qual- ity, and embrace digital transforma- tion underscores its commitment to sustainable progress. “Looking ahead, we expect a contin- ued focus on managing non-per- forming loans, cost control, and the integration of AI and ESG principles into banking strategies, ensuring long-term competitiveness and sta- bility." the BANKING EXECUTIVE 28 ISSUE 195 MARCH 2025