Driven by a combination of factors, 2013 will be much significant for Qatar's banking sector. The integration of regulatory regimes, take off of key infrastructure projects and the emergence of a fresh regime in US are all expected to bring in an added investor confidence.
"Coming year should be very interesting year for number of reasons for the banking sector. If we start with macro level, the US election is critical, both in terms of global and regional economy. In the run up to the World Cup, lot of projects will be either kicked off or taken off in 2013. Banks are getting ready for that", Omar Mahmood, Partner, Financial Services, KPMG told The Peninsula in an interview.
The multi-billion spending on infrastructure will kick off in 2013. We see Qatar Islamic Bank (QIB) and QIIB (International Islamic) launching sukuk. QNB Group launched its debut bond issue under its Euro Medium Term Note Programme in the international capital markets.
Doha Bank is going for huge capital raise. Almost all the banks have embarked on some form of equity or capital or debt raising to show up their balance sheet to give them the funds to be able to take part in some of these infrastructure funding.
"The year 2013 will also see a great appetite for project financing. QP is talking in to lot of project financing. There will be l be more appetite this type of financing and project bonds," he said.
Locally, Qatari banks will clearly not able to manage such a magnitude of funds, on their won. We will see more syndication and more collaboration with regional and international banks. They will have to join syndication to be able to support the growth.
On the poor performance of the listed banks' shares, Omar said held market sentiments responsible for the fall. "It is not the fundamentals, but sentiments that really driving down the return on equity. Sustaining global market concerns, region's prolonged political instability and investors' nervousness are together contributing to the decline."
A snapshot of results for listed banks in Qatar released by KPMG revealed the banks' share prices have dropped 6.16 percent during the first nine months of 2012. According to the market analysts, average return on equity for banks in Qatar fell to 18.6 percent in 2011 from a peak of 30.4 percent in 2007.
"Sentiments are not necessarily linked to fundamental value of a company. Investors are cautious about the possible impact of market sentiments on share prices. But it will not affect the fundamentals. If you look at the numbers, the net profits of all these banks have increased during the period. Net profit of all listed banks has collectively increased by 9.5 percent from the nine month period ended 30 September 2011, predominantly driven by higher net interest and investment income".