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Posted on December 24, 2013

Loans and deposits growth was flat in the month of November. Loans declined by 0.1% month-over-month (MoM) but are up 11.9% year to date (YTD). Deposits also dipped by 0.2% MoM (+16.4% YTD) in the month of November 2013. Going forward, we expect activity in the banking sector to pick up in the coming months.

QNB Financial Services monthly banking sector update 1 [].jpg

The banking sector’s loan-to-deposit ratio (LDR) remained at 107% at the end of November 2013 vs. 107% in October 2013. Going forward, some banks will be issuing Tier I bonds. Commercial Bank of Qatar (CBQK) and Doha Bank (DHBK) announced that they will be raising QR2 billion each in Tier 1 bonds to improve their capital adequacy ratios (CARs) as well as provide additional funds aiding loan book growth.

QNB Financial Services monthly banking sector update 2 [].jpg

Public sector deposits retreated by 5.0% MoM (+28.1% YTD), while private sector deposits gained by 3.7% MoM (+15.1% YTD). Delving into segment details, the government institutions segment (represents ~58% of public sector deposits) ticked up by 1.4% (+27.6 YTD) vs. a 4.9% decline in the previous month. However, the government segment retracted its positive momentum, contracting by 16.4% MoM but it is still up 44.1% YTD. The semi-government institutions segment followed in the footsteps of the government segment slipping by 4.2% MoM (+7.4% YTD). On the private sector front, the consumer segment expanded by 6.1% MoM (+23.0% YTD) and the companies & institutions segment ticked up by 1.2% MoM (+7.5% YTD).

QNB Financial Services monthly banking sector update 3 [].jpg

The overall loan book exhibited flattish performance in the month of November. Total domestic public sector loans declined by 1.1% MoM after a robust performance in October. On a YTD basis, public sector loans are up 8.8%. The government segment loan book contracted by 7.6% MoM (+6.3% YTD). On the other hand, the government institutions’ segment (represents ~66% of public sector loans) inched up by only 0.8% MoM (+12.1% YTD). We believe public sector loan growth will be the primary driver of the overall loan book in 2014. Our assumption is based on the expected uptick in project mobilizations in the coming months. Private sector loans inched up by 0.9% MoM (+12.2% YTD). The Services segment posted the biggest growth, up 9.9% MoM (+43.6% YTD), while the Real Estate (contributes ~28% to private sector loans) loan book retreated by 1.2% MoM (down 3.1% YTD). Consumption and others (contributes ~31% to private sector loans) declined 1.5% MoM (+13.5% YTD).

Specific loan-loss provisioning stood at 1.4% of average trailing 12-months loans vs. 1.4% in October 2013.