Qatar banks face lower profitability in 2016, says S&P

Qatari banks are projected to see lower profitability, contracting liquidity and slowed credit growth this year, Standard & Poor's Ratings said in a report on Tuesday.

Lower hydrocarbon prices and the government measures to reduce spending will likely imply slower deposit growth and tightened liquidity in Qatari banks this year.

Credit growth, revenue and earnings are forecast to be limited, due to higher funding costs after interest rate hikes, in addition to credit losses which are expected to increase amid tough economic conditions and potential pressures in some sectors, such as contracting.

Meanwhile, further cuts of government spending will likely impact private-sector lending.

Qatari banks are projected to adopt a conservative lending policy, which would translate into subdued growth.

They will likely pay lower dividends in an attempt to retain profits and meet regulatory capital requirements, the report said.

"Importantly, we foresee some tension on banks' asset quality," S&P credit analyst Nadim Amatouri said.

However, most banks under coverage would maintain healthy operating performance, thanks to their strong provisioning and healthy capitalization.

Elsewhere in the GCC region, banks were earlier expected to see lower profitability and deteriorated asset quality this year, the rating agency concluded.