Qatari banks face weakening profitability in 2016: S&P

Updated 02 February 2016
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Qatari banks face weakening profitability in 2016: S&P

DUBAI: In an article published this week, titled “Qatari Banks’ Profitability To Wane In 2016,” Standard & Poor’s Ratings Services says that it anticipates tightening liquidity, slackening credit growth, and weakening profitability for Qatar’s banks in 2016.
Although the drop in hydrocarbon prices and the Qatari government’s streamlining of its public investment program are putting the brakes on the domestic economy, banks’ asset quality held generally steady while credit growth remained resilient on the back of strong private sector activity in 2015.
“Nevertheless, as liquidity in the banking sector tightens further with the rise of local and global interest rates, we expect credit growth will lose some steam,” said the report.
“We think that operating conditions for Qatari banks will toughen this year, denting their profitability,” said Standard & Poor’s credit analyst Timucin Engin.
In 2015, the Qatari public sector withdrew some of its deposits from the domestic banking system in the process.
The report added: “We expect more of the same in 2016 and foresee a further squeeze on banks’ liquidity. Further trimming of government spending will likely reduce private-sector lending opportunities. At the same time, we think banks will manage their funding profiles more conservatively, which should translate into lower growth. We also expect credit losses will increase given the economic slowdown and the pressure we expect in some sectors, such as contracting.”
Standard & Poor’s credit analyst Nadim Amatouri said: “Importantly, we foresee some tension on banks’ asset quality.”
Amatouri said: “Over the past few years, public-sector lending took a back seat, while a visible portion of new lending was in the private sector. We now anticipate increased credit losses in the private sector, particularly given our expectations for slowing real GDP growth.”
In particular, the banks’ exposures to contractors are susceptible to losses amid slacker capital spending.
“Moreover, as in other GCC states, we think a drop in the performance of capital markets could translate into some losses on certain high-net-worth portfolios,” said the report.


RBS says Saudi bank merger boosts its core capital

Updated 16 June 2019
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.