Rated Qatari Banks' Asset Quality "Improving"

Doha, July 13 (QNA) - The asset quality of rated banks in Qatar and Saudi Arabia is improving, English-language daily (Gulf Times) reported Wednesday, citing Credit Suisse report.
"Qatar and Saudi Arabian banks continue to exhibit high asset quality, with 2010 NPL (non-performing loans) ratios of 1.7% and 2.4% respectively," according to the report.
Finding that the larger issue with the UAE banks is that their NPL ratios are likely yet to peak, it said. "We estimate the average NPL ratio is likely to increase to 8.4% in 2012." The UAE banks also have the lowest coverage ratio of 51% in 2010 compared with more "reassuring" levels of Saudi Arabia (120%) and Qatar (101%).
Observing that credit costs are returning to normal in Qatar and Saudi Arabia during the first quarter 2011, there was provisioning decline in Saudi Arabia and Qatar, the report said.
"We estimate around 8% of the total income will be wiped out by provisioning in 2011 for Saudi Arabia and Qatar, it said, adding "we expect Saudi Arabia and Qatar to have provisioning coverage well above 100% in 2011."
Credit Suisse expects the NPL ratio for Qatar-3 banks to further decline to 1.6% in 2012 and provision coverage to increase to 111% in 2012.
Among the top three Qatari banks (Q3), it expects Qatar National Bank (QNB) to have the lowest NPL ratio at 1% (0.9% in 2010) and highest provision coverage at 125% in 2011 (118%). QNB continues to benefit from high public sector exposure (51% of loan book in 2010).
"We expect Doha Bank to have the highest NPL ratio at 4% in 2011 (3.9% in 2010) with a provisioning coverage of 95% (90%)," it said.
On liquidity, it said for Qatar-3 banks, the loan-deposit ratio rose to 84.6% in Q1 2011 from 83.6% in the fourth quarter (Q4) of 2010 whereas loan-asset ratio remained flat at 57.6% in Q1 this year.