By Santhosh V Perumal

Business Reporter

Qatar’s banking sector witnessed 25.3% year-on-year (y-o-y) rise in net interest income (NII) in third quarter (Q3) of 2013 against the Gulf average of 10.2%; even as it saw “significant” expansion in provisions for bad loans, according to a report.

Qatari banks’ NII grew the most (25.3%), followed by those in the UAE (11.6%), Saudi Arabia (5.7%) and Kuwait (2.7%), Global Investment House said in a report.

However, the GCC banks’ NII increased 10.2% y-o-y, but remained almost flat on quarter-to-quarter basis at 0.6% compared to 3.6% in the UAE and 2.9% in Saudi Arabia; whereas Kuwait and Qatar saw 4.7% and 3.3% fall, it said.

Global banking universe constituted 22 banks with seven in Saudi Arabia, five each in Qatar and the UAE, four in Kuwait and one in Oman. Qatar’s banks are QNB, Commercial Bank, Doha Bank, Qatar Islamic Bank and Masraf Al Rayan.

Among Qatar-based banks, QNB saw a robust growth of 28.1% in NII driven by consolidation of its Egypt-based subsidiary National Societe Generale Bank-Egypt. Masraf-Al-Rayan’s NII rose 35.3% due to a 26 basis points y-o-y improvement in net interest margins (NIM). Commercial Bank reported 39.1% growth in NII due to 24bps y-o-y rise in NIM.

Total assets of GCC banks under its coverage expanded 12.4% y-o-y in Q3, 2013. Qatar-based banks witnessed the strongest growth in total assets at 22.4%, followed by banks in Kuwait (14.3%) and the UAE and Saudi Arabia (9.1% each).

Loan book growth continues to remain strong across the GCC markets (13.6% y-o-y growth) with Qatar’s lenders witnessing the highest increase of 25.4%, followed by Saudi Arabia (11.8%), Kuwait (11.6%) and the UAE (9.6%), it said.

“Qatar-based banks maintained their loan growth momentum due to an increase in public sector spending as the country is preparing to host the FIFA World Cup in 2022,” according to Global. Acquisition made by QNB and Commercial Bank during the year also propelled loans growth considerably, it said, adding among Qatar-based lenders, Commercial Bank and QNB registered higher growth in loan book of 34% and 27.4 % respectively.

Non-interest income of Global’s coverage banks, however, was down 1.4% y-o-y in Q3 due to absence of one-off gains.

Amongst the Qatar based banks, QNB reported 26.3% growth in non-interest income backed by 55.2% rise in fee income.

During the quarter, the overall operating expenses of GCC banks had risen by 15.1% y-o-y, primarily driven by Qatar (37.4%), followed by the UAE (15.2%), Kuwait (14.6%) and Saudi Arabia (7.6%).

Cost to income ratio of Global universe banks increased to 32.8% y-o-y in Q3, 2013; amongst which, that of the Qatar banks grew to 27.5% this Q3 from 23% in the previous year.

Among the Qatar banks, Commercial Bank recorded the highest rise in operating expenses (59.3%) mainly due to acquisition and branch expansion. Cost to income ratio of the bank increased to 49.3% in Q3, 13 from 30.1% in a year ago period. QNB witnessed a 57.8% growth in operating expenses during the quarter due to higher staff cost post consolidation of NSGB.

Global found that provision expenses among the GCC banks increased 4% y-o-y during Q3, 2013, mainly due to “significant increase” (of 82%) in provisions of Qatar banks and the UAE (12.3%). However, those of Saudi Arabia and Kuwait fell 16.1% and 4.5% respectively.

Commercial Bank’s provisions for impaired loans grew by a whopping 440.5% y-o-y mainly due to provisions taken against emerging market strategic equity investments. QNB also registered 66% rise in provisions due to growth in its overall loan portfolio after the NSGB acquisition, Global said.

On deposits, Global universe witnessed 14.1% y-o-y growth in Q3, 2013 with Qatar registering 21.3%, Kuwait (15.7%), the UAE (12.5%) and Saudi Arabia (11.1%).