Qatar's Islamic banking resilient with 25% asset share in 2023

March 29, 2024 (MLN): Islamic banking is prominent in Qatar, constituting 25% of total sector assets at end-2023 (end-2022: 25%) due to high public demand, the mainstream relevance of Islamic products, and solid branch and digital networks, says Fitch Ratings in a new report.

The segment’s financing growth was flat in 2023, owing to large government repayments and subdued demand from the public sector. However, performance was supported by solid oil prices and stable operating conditions.

Qatari Islamic banks’ financing growth will probably remain subdued in 2024, whereas profitability, which improved in 2023 due to lower financing impairment charges, will remain stable.

Capital buffers should also remain adequate for the risks, supported by internal capital generation and low financing growth.

Fitch expects asset quality to remain resilient in 2024 as adequate buffers and sound underwriting standards mitigate risks from higher concentrations and exposure to the real estate sector.

The Qatar Central Bank’s launch of Islamic structured deposits and repo operations enhances domestic Islamic banks’ short-term liquidity tools.

Fitch expects Qatari banks to continue issuing sukuk in 2024 as they replace upcoming maturities this year and diversify their funding bases.

Fitch upgraded three Qatari Islamic banks to ‘A’ from ‘In March following the upgrade of the Qatari sovereign to ‘AA’ from ‘AA-’, reflecting the Qatari authorities’ increased ability to provide support.

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