Qatar banks ‘most vulnerable’ in region, says S&P

The commercial district of Doha with a sparse scattering of newly-built towers in the early stages of the its expansion. (Shutterstock/File Photo)
Updated 01 October 2018
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Qatar banks ‘most vulnerable’ in region, says S&P

  • Excluding Qatar National Bank, the loan books of the rest of the Gulf country’s banking sector faces increasing pressure from the continued boycott imposed by other Gulf states
  • S&P’s report also noted the risks posed by Gulf banks’ international operations, specifically the sector’s exposure to Turkey

LONDON: Qatari banks are the “most vulnerable” in the Gulf region due to the risk of a deterioration in the quality of their assets, according to a report by ratings agency S&P Global.
Excluding Qatar National Bank, the loan books of the rest of the Gulf country’s banking sector faces increasing pressure from the continued boycott imposed by other Gulf states, coupled with a drop in real estate prices and hotel occupancy rates.
“We see an important correlation between any potential escalation or de-escalation of the boycott measures and deterioration or stabilization of Qatari banks’ asset quality,” the report published on Monday said.
S&P’s report also noted the risks posed by Gulf banks’ international operations, specifically the sector’s exposure to Turkey.
A number of the region’s banks have stakes in Turkish institutions, and have been left exposed to the recent sharp deterioration in the Turkish lira, and the “lackluster” economic performance of the country.
“Those GCC banks with exposures in the country will see some impact on their asset quality indicators,” the report read, noting that the risk is limited to just a few institutions with some of them equipped with the “financial muscle” to absorb the risk.
The overall financial profile of GCC banks should remain stable in 2019, S&P Global forecast, with profitability likely to “stabilize” as banks benefit from higher interest rates, in line with the higher US Federal Reserve rates.
Banks’ fortunes will also be buoyed by the increase in oil prices seen this year and anticipated economic growth in the region.
S&P forecast that oil prices will stabilize at $65 per barrel in 2019 and $60 by 2020. It estimated that growth will reach an average of 2.8 percent in 2019 for the six GCC countries.
Commenting on the report’s findings, Ehsan Khoman, Dubai-based head of regional research and strategy at MUFG Bank, said that there could be a “mild” increase in non-performing loans in the region, particularly in certain sectors.
“Following the challenging operating environment in recent years owing to weaker economic activity across the GCC, the loan performance of regional financial institutions has been subdued,” he said.
“In this context, non-performing loans may edge up, albeit mildly, across the region with sectors sensitive to fiscal consolidation through spending rationalization, such as real estate and construction feeling the pinch more noticeably.”
He tempered his comments, noting that the region’s banks are now better equipped to deal with the risks of deteriorating assets.
“The introduction of a number of regulatory frameworks, such as credit bureaus and credit-management tools, could improve GCC financial institutions’ risk controls and provisioning levels,” he said.
Khoman also sees Gulf banks benefiting from an improving business environment in the next year.
“GCC financial institutions are likely to benefit from continued benign deposit growth in 2019, owing to higher government deposits stemming from both higher oil receipts, as well as their continuous strategy of tapping international markets to fund their investment programs and fiscal deficits,” he said.
“Following the challenging period of lower for longer oil prices between mid-2014 and mid-2017, the intense funding pressures for GCC financial institutions has been broadly lifted. In-turn, with oil prices hovering near four year highs at the current juncture, domestic liquidity within the GCC banking system has been significantly restored.”


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 26 May 2019
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.