Qatar’s banking sector began 2025 on a positive trajectory, marked by notable increases in both loan books and deposits during January. This encouraging start to the year reflects strong government spending and resilient private sector activity, positioning the sector for continued growth amid a stabilizing global economic environment.
Loan Growth Driven by Public Sector
The expansion in loans during January was significantly influenced by the public sector. Credit facilities extended by local banks grew by 1.9% in January, reaching QR1,372.5 billion. This uptick was primarily driven by a 5.3% surge in public sector loans. The government segment, which makes up 31% of public sector loans, experienced a substantial 13.3% increase, largely due to a 26.5% rise in government overdraft facilities. This suggests heightened government spending needs, potentially linked to infrastructure projects and other state-led initiatives.
Additionally, the government institutions segment, accounting for 65% of public sector loans, saw a 2.2% increase. In contrast, the semi-government institutions segment experienced a slight decline of 0.2% in January. Overall, loans grew by 4.6% in 2024, compared to a 2.5% growth in 2023, with an average annual growth of 5.4% over the past five years (2020–2024).
The private sector also contributed positively to the loan growth, with strong demand observed in real estate and trade financing. However, concerns remain about the sector’s exposure to high-risk areas like real estate and contracting. As of January, loans to these segments continued to grow, indicating sustained business activity despite global economic uncertainties.
Deposit Increases Across Sectors
Deposits in Qatar’s banking sector rose by 1.3% during January, totaling QR1,040.0 billion. This growth was mainly due to a 1.5% increase in private sector deposits and a 1% rise in public sector deposits. In 2024, deposits increased by 4.1%, reversing a 1.3% decline in 2023, and have grown by an average of 3.9% over the past five years.
Private sector deposits were buoyed by higher savings and fixed deposits, reflecting confidence in the local banking system. Meanwhile, public sector deposits saw modest gains, supported by increased liquidity from government entities. Non-resident deposits, which form a crucial part of Qatar’s funding base, remained stable, highlighting continued confidence from international investors.
Asset Trends and Liquidity
Total assets of Qatar’s commercial banks slightly decreased by 0.3% in January, amounting to QR2.040 trillion. This decline was primarily due to a 2.3% reduction in foreign assets and an 8.4% drop in reserves. Despite this, total assets grew by 3.9% in 2024, compared to a 3.4% growth in 2023, with an average annual growth of 5.7% over the past five years.
Liquidity remained healthy, with liquid assets to total assets slightly decreasing to 30.2% in January from 31.3% in December 2024. Loan provisions to gross loans edged lower to 3.8% in January, compared to 3.9% in December 2024. These provisions have increased from 2.3% in 2019 to 3.9% in 2024, as banks have been provisioning for higher-risk loans, particularly from the contracting and real estate sectors.
The decrease in foreign assets can be attributed to ongoing adjustments in investment portfolios and a focus on local lending opportunities. As global markets stabilize, Qatari banks are expected to diversify their asset base further, balancing between domestic and international exposures.
Analyst Insights
Financial analysts commented that 2025 has started positively for Qatar’s banking sector, with both loan books and deposits showing significant gains in January. The 1.9% rise in the overall loan book was mainly driven by the public sector, particularly a 13.3% increase in government credit facilities, indicating increased government spending needs. The overall deposit growth of 1.3% at the start of 2025 has come from all three main sectors: private sector, public sector, and non-residents.
Analysts also highlighted the importance of government spending and infrastructure projects in sustaining loan growth. The public sector’s robust borrowing activity suggests that major projects, including those related to the 2030 National Vision and LNG expansion, are driving credit demand. Additionally, private sector confidence appears to be strong, with businesses continuing to invest in capacity expansion and trade.
Outlook for 2025
Looking ahead, Qatar’s banking sector is expected to remain profitable in 2025. Industry experts project that Qatari banks will benefit from strong capitalization and adequate liquidity, with only a modest drop in net interest margins due to anticipated interest rate cuts. The sector’s total capital adequacy ratio (CAR) and Tier 1 ratio comfortably exceed the central bank’s minimum requirements of 12.5% and 10.5%, respectively.
Credit growth, however, is expected to decelerate, reflecting a broader slowdown in economic activity and reduced credit demand following the completion of major infrastructure projects. Domestic credit growth is forecasted at approximately 5% in 2025–2026, down from the 11% average witnessed during 2019–2022. Local funding sources are anticipated to play a more prominent role in financing credit expansion, with domestic deposits already showing a 5% increase in the first nine months of 2024.
The government’s supportive stance mitigates risks of capital outflows, particularly in the event of heightened geopolitical tensions. While the sector faces elevated leverage, with nearly 40% of domestic credit tied to high-risk and cyclical sectors such as real estate and related services, the government’s tourism and non-oil diversification initiatives, coupled with interest rate cuts, are expected to stabilize asset quality despite ongoing risks.
Furthermore, the expansion of Qatar’s liquefied natural gas (LNG) production is set to bolster the economy, providing additional liquidity and investment opportunities for local banks. The anticipated surge in LNG revenues could also enhance government deposits, further strengthening the sector’s funding base.
Challenges and Risks
Despite the positive outlook, challenges remain. The high concentration of loans in the real estate and contracting sectors poses a risk, especially if property prices decline or project delays occur. Rising global interest rates and potential geopolitical risks in the region could also impact liquidity and investor sentiment.
Moreover, as global central banks, including the US Federal Reserve, signal a cautious approach to interest rate adjustments, Qatari banks may need to navigate a complex interest rate environment. Balancing profitability with asset quality will be key, particularly if borrowing costs rise unexpectedly.
Conclusion
Qatar’s banking sector has commenced 2025 on a strong footing, with significant growth in loans and deposits during January. The sector’s resilience, underpinned by robust capitalization and liquidity, positions it well to navigate the anticipated economic challenges and capitalize on opportunities arising from the country’s ongoing diversification efforts and expansion in liquefied natural gas production.
With a favorable economic outlook, backed by government spending and steady private sector growth, Qatar’s banks are set to play a crucial role in the nation’s broader economic ambitions. However, maintaining a balanced approach to risk management will be essential to sustain this growth momentum throughout 2025.
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