Moody’s Credit Rating Agency: Qatari banks mitigate risks of unexpected shocks

Moody’s Credit Rating Agency has praised the resilience of Qatari banks, highlighting their robust growth, asset quality, and substantial capacity to navigate various challenges. According to Moody’s recent report, Qatari banks have demonstrated impressive liquidity coverage ratios and successfully attracted significant financial inflows through diverse deposits.

The report notes that, during the recent period, Qatari banks have been primarily funded by customer deposits, which accounted for approximately 52% of total assets as of June 2024. Moody’s specifically pointed out the substantial level of deposits from government and government-owned entities, which represented around 36% of total deposits as of June 2024. Moody’s commended Qatari banks for their successful efforts in expanding and attracting deposits from the domestic private sector while also drawing in foreign and international deposits.

The agency also highlighted the ongoing expansion in the credit sector, which is in line with the country’s economic growth trajectory. In particular, Moody’s observed that credit extended to the private sector is projected to see notable growth this year, reflecting the sustained momentum in implementing large-scale projects within the country. Moody’s forecasts that private-sector credit growth will be around 3%-4%.

Moreover, Moody’s emphasized the reduced credit risks faced by Qatari banks. The agency noted that Qatari banks have effectively mitigated the risks associated with unexpected economic shocks due to their loan portfolios and credit exposures and their ability to manage associated challenges. A significant portion of credit is directed towards the public sector, which significantly reduces the risk of credit defaults.

The report also underscores the pivotal role of prudential regulations issued by QCB and aimed at curbing Qatari banks’ overreliance on foreign funding. These regulatory frameworks have reinforced financial stability and helped decrease foreign liabilities to 33% of total liabilities as of the end of June 2024, down from a peak of approximately 39% as of year-end 2021. Additionally, banks have successfully diversified their foreign liabilities across various maturities and geographies.

Moody’s also anticipates that Qatari banks will shift toward a longer-term funding structure in a lower interest rate environment. As of the end of March 2024, Qatari banks’ stocks of liquid assets stood at around 24.7% of total assets, providing a sound buffer against potential market fluctuations and risks and supporting their growth trajectory.