By Satish Kanady
DOHA: Payment default by real estate developers and contractors are causing major concerns to Qatar’s conventional banks.
Defaults by infrastructure sector is equally a matter of concern for these banks, but not a major problem for Islamic and foreign banks, a survey on ‘risk perception of banks’ conducted by Qatar Central Bank (QCB) for the years 2014, 2015 and 2016 has revealed.
The risk average that ranges between 1-6, shows the risk of default by real estate developers and contractors has been ranked the highest (One) for the year 2014 and “2” for 2015 and 2016. The risk average for default in infrastructure are ‘2’,’3’ and ‘3’ for the year 2014, 2015 and 2016, respectively.
Variations in oil prices have been projected highly risky for foreign banks and Islamic banks. For the conventional banks, the risk average is ‘3’,’2’ and ‘1’ for the years 2014, 2015 and 2016 respectively. Foreign banks see decline in fiscal balance as a problem, the QCB document noted.
The survey that forms part of the central bank’s latest financial stability report shows most of the banks expect overall credit, market, liquidity and systemic risk to remain unchanged or increase during 2015 and 2016. Some of the findings suggest variation in oil price and political unrest in the MENA region remain the most important global risks.
Risk from decline in domestic fiscal balance is expected to increase in 2015 and further in 2016. Slowdown in domestic growth and credit growth are other major domestic macroeconomic risks. The highest ranked source of liquidity risk is different for different group of banks. It is withdrawal by retail depositors for Islamic banks and wholesale depositors for conventional banks. For foreign banks, it is drying up of domestic inter-bank market.
The document said the non-performing loan ratio (NPL) of banks declined during 2014 indicating moderation of credit risk during the year. The growth in NPLs during the year was 2.2 percent compared to 25.8 percent in the previous year. Banks seem to have been more prudent in lending in the recent past. During the first quarter of the year there was almost no growth in NPLs. There was some increase during the second quarter but was almost offset by the decline in the NPLs during the third and fourth quarters of the year. As in the previous two years, the share of NPLs in the private corporate sector continued to moderate. The share of NPLs outside Qatar after increasing for three years was stable during 2014. The share of NPLs in personal loans has been rising rapidly and banks need to monitor these loans more carefully to rein them in. Qatar’s banking sector remained almost unaffected by fall in oil prices and continued global uncertainties during 2014. The Peninsula
