Fitch: Qatari Islamic banks' asset quality weakening; still better than conventional banks

Fitch Ratings-London-03 August 2020: Qatari Islamic banks' profitability will be hit by lower profit rates, lower business volumes, and higher financing impairment charges in 2020 as a result of lower oil prices and the coronavirus pandemic, Fitch Ratings says.

Asset quality will also weaken, but the true impact will be masked in the short term by financing deferral programmes and regulatory flexibility for banks to recognise impairments.

If economic disruptions persist, weaker asset quality and profitability will put pressure on currently adequate capital buffers.

Liquidity is adequate and likely to benefit from government support if needed. Mergers and acquisitions are still possible to create larger Islamic institutions in the market.

In 2019 the challenging Qatari operating environment continued to put pressure on asset quality, although Islamic banks fared better than their conventional peers, continuing to grow more quickly and reaching 24% of sector assets at end-2019 (end-2018: 22%).

The full report, "Qatari Islamic Banks 2019 Results Dashboard: Weakening Asset Quality; Still Better than Conventional Banks" is available at www.fitchratings.com or by clicking the link above.

Copyright Press Release 2020

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