Moody's Agency Raises Its Outlook for Qatari Banks to "Stable"

Moody's agency, the second-largest credit rating agency at the global level, raised its outlook for the Qatari banking system from negative to "stable", supported by the improvement in the operating conditions of banks, the waning of the negative effects of the Coronavirus (Covid-19) pandemic, and the high pace of economic recovery.

Moody's said in its latest report that Qatari banks are strong and have the ability to withstand global geopolitical risks, emphasizing the strong performance of loans and good capitalization of banks.

The agency indicated a number of positive factors, including good profitability rates, and the great ability of banks to absorb losses, with the continued strength and flexibility of capital, even under the high-stress test scenarios applied by the agency, and it is expected that profitability will continue to improve.

The agency suggested a decrease in the cost of provisions supported by the high coverage of provisions from non-performing loans by 134 percent, which supports the continued improvement of overall profitability.

Moody's affirmed that the support of the prudent regulatory environment, and that in addition to the lending process to the low-risk Qatari government and semi-governmental institutions, local deposits are growing, while non-performing loans remain at low levels, In addition to its expectations that financing conditions will improve, supported by the rise in oil prices and the increase in domestic deposits, pointing to the growth achieved by credit from 35 percent in 2019 to 39 percent in 2021.

Moody's indicated the high rate of liquidity coverage in Qatari banks, which exceeds 100 percent, in addition to the high capital adequacy ratio of 19.7 percent last year, expecting liquid assets to remain strong and stable at 24 percent of total assets, Liquid financial assets are expected to remain strong and stable at 24 percent of total assets, with improved net income for tangible assets backed by robust efficiency.

The agency also expected positive economic growth for the current year, after the economic downturn last year, supported by the activities accompanying Qatar’s hosting of the 2022 FIFA World Cup Qatar, and the rise in oil prices, which will create a favorable economic environment for the consumer, which supports the prospects for positive expectations, With the stable sovereign credit rating of Aa3/ for the State of Qatar, Moody's affirmed the continuity of the government's ability to support banks in maintaining their strength.

While in a previous report issued by Standard & Poor’s, the largest rating agency in terms of market share, it published the results of measuring the impact of the Russian-Ukrainian war on a sample of banks in a number of countries in the region, including Qatar. Overall, the results confirmed that Qatari banks were not affected by global geopolitical developments.

It is worth noting that the Qatar Central Bank has taken a number of new policies and strategies to emphasize the stability and safety of the banking and financial sector, and to promote economic growth, which were translated by decisions and circulars that were directed to banks and financial institutions operating in the country.