Doha, Qatar: Qatari banks are set to benefit from the country’s accelerating diversification agenda and the expansion of liquefied natural gas (LNG) production, with credit demand expected to grow across tourism, sporting events, and business exhibitions, according to Moody’s Ratings.
The outlook comes as non-hydrocarbon GDP growth is projected to rise to 3.5 percent annually in 2025 and 2026, providing fresh momentum for the banking sector despite mounting pressures on profitability.
“Qatari banks, similar to other GCC banking systems, continue to play a pivotal role in implementing the governments’ economic diversification agendas in the non-hydrocarbon parts of the economy where they conduct the bulk of their lending activities,” Francesca Paolino, Assistant Vice President at Moody’s Ratings, told The Peninsula.
Moody’s expects Qatar’s non-hydrocarbon GDP growth to accelerate to 3.5 percent in 2025 and 2026, compared with 3.4 percent in 2024. Growth will be supported by projects tied to the country’s expanded liquefied natural gas production, along with sporting events, business exhibitions, and tourism-related activity. Private-sector credit growth is forecast to reach 6 percent in 2025, up from 4 percent last year.
On the other hand, aggregate operating income rose 5 percent in the first half of 2025, supported by growth in both net interest and non-interest income.
However, higher costs eroded the gains. Operating expenses climbed 10 percent while loan-loss provisions increased 8 percent, leaving net profit up 1 percent year-on-year.
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“We expect higher fee and commission income, driven by growing non-funded income-related activities, will offset a potential drop in net interest income in H2 2025 as interest rate cuts constrain margins, keeping operating income broadly stable,” Paolino said.
“Nonetheless, elevated provisioning costs because of ongoing challenges in the real estate and contracting sectors and rising operating expenses from continued investments in digital services and technology, will offset this stability, leading to a decline in net profitability to 1 percent to 1.1 percent of tangible assets for full-year 2025.”
Provisioning costs are likely to remain high in the second half, Moody’s warned. The sector is being tested by excess capacity in real estate and payment delays in contracting, though banks that provisioned heavily in recent years are beginning to scale back. Net interest margins, which stood at 2.2 percent in the first half, are expected to come under pressure as rate cuts take effect later this year.
“Loan interest rates are likely to decline faster than the rates paid on deposits and other funding costs,” Paolino noted, adding that banks’ short-term funding profiles would help mitigate the impact.
She also emphasised that the sector retains significant buffers, with loan books supported by lending to the Qatari government and public-sector entities, alongside personal loans largely extended to Qatari nationals with high job security.
Analysts affirm that credit demand is expected to be strongest in sectors linked to Qatar’s LNG expansion, sports and cultural events, business exhibitions, and tourism.
Overall, while profitability pressures will persist, the medium-term trajectory for Qatari banks remains underpinned by strong macroeconomic fundamentals and continued government support. Expanding LNG revenues, combined with the diversification agenda, are expected to sustain loan growth opportunities and improve funding resilience. Industry experts argue that ongoing investment in technology, digital banking, and risk management will be critical to strengthening competitiveness, enabling Qatari banks to capture rising demand while navigating cyclical challenges in real estate and external funding markets.
