Soaring interest rates to bolster financial sector

Doha: Qatar s financial sectors will continue to witness significant net profits in the coming quarters due to increasing interest rates. A report by...

Doha: Qatar’s financial sectors will continue to witness significant net profits in the coming quarters due to increasing interest rates. A report by Fitch Solutions indicated that huge net interest margins have continued to support the bank’s profitability this year.

The net profits of Qatar National Bank surged by 7 percent y-o-y to QR8.2bn during the first half of 2024, whereas QIIB registered a growth of 6.5 percent to QR655m during the same period as compared to H1 2023. Moody’s assigned “A2” Ratings to QIIB with a stable outlook.

Market experts highlight that increased lending rates and revving credit growth will persist to strengthen the banks’ income.  Nevertheless, pressure on net profits is expected to emerge next year, due to cuts to policy rates commencing from September 2024, and higher funding costs, due to increased reliance on domestic funding, and a lower loans-to-deposit ratio.

The report said: “Higher for longer interest rates will bode well for the banks’ profitability. However, this could put pressure on banks with elevated exposure to the struggling real estate sector, leading to a tickup in non-performing loans.”

Meanwhile, non-performing loans inched up from 3.7 percent in 2022 to 3.9 percent during the past year. Additionally, banks have adequate provisions for such exposures.