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Wednesday, January 19, 2022

Qatar National Bank records profit but ‘remains on alert’

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Qatar National Bank continues to set aside funds in an effort to be cautious in the many markets where it has a presence 

Qatar National Bank, the biggest financial institution in the gulf region, has signaled caution by “boosting money set aside in provisions,” reported Bloomberg and Reuters 

On Tuesday, Reuters stated that the world’s strongest bank recorded a 10% increase from 2020’s net profit of 3.3 billion dollars to 3.6 billion dollars. Further calculations indicated that the bank’s Q4 earnings were 2.9 billion, which was more than what analysts had initially predicted.

Many other banks in the gulf have seen improvements in regional and international markets as restrictions over the COVID pandemic loosened during the close of 2021. Qatar itself has a brighter outlook as it gears up to host the world cup and as energy and oil prices increase.

However, QNB is exercising restraint as it braces for credit loss by getting more money in its reserves and watching over volatile international markets that it has a stake in.

A representative told Bloomberg, “[QNB] remains cautious on the external environment with respect to potential risks that may arise from key markets where QNB Group operates.”

The bank already booked 1.9 billion dollars in loan loss provision over the past year which is 21% higher than the previous year, in fear that a reserve is needed to cover losses unlikely to be repaid. This protectionism is prevalent especially in its international operations which include Turkey, Egypt, India, and France.

In Turkey, loan amounts given by QNB owned Qatar Finansabank has decreased from 10.4% in 2020 to 9.6% in 2021.

Read also: Inflation in Qatar reaches record high

Turkey has seen a significant devaluation in the value of its currency in the past twelve months, which continued as President Recep Tayyip Erdogan’s policy of not raising interest rates stoked inflation. According to Bloomberg, authorities have since rolled out a series of measures to support the lira.

“While the headline results missed our expectations, we note that this is almost entirely driven by higher” loan-loss provisions, Citigroup Inc. analyst Rahul Bajaj said in a research note. Much of the increase in the charges appears “to be used for building provision coverage.”

Current standing of QNB

  • Operating income 28.3 billion riyals; estimate 27.33 billion (range 26.57 billion to 27.84 billion)
  • Dividend per share 0.55 riyals
  • Coverage ratio increased to 117% from 107%

QNB, which serves more than 20 million customers, is 50% owned by Qatar’s sovereign wealth fund, the Qatar Investment Authority.

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