x Abu Dhabi, UAEThursday 18 January 2018

Qatar's new personal borrowing rules may slow bank profits

On The Wires: New limits on how much Qatari citizens can borrow could harm profit growth at the nation's banks, Credit Suisse said today.

DOHA // Qatar's new regulations on personal borrowings may slow growth and profits at banks such as Commercial Bank of Qatar and Doha Bank QSC, according to Credit Suisse Group AG.

Commercial Bank, the nation's second-biggest bank by assets, and Doha Bank, the third-largest lender, had their stock recommendations cut to "neutral" from "outperform," Mohamad Hawa, London-based research analyst at Credit Suisse, wrote in a report yesterday.

"We adjust our key forecasts and cut loan growth for Commercial Bank to 5.1 per cent this year and Doha to 3.2 per cent," Hawa wrote. The bank lowered the 2011-2012 cumulative earnings estimates by 15.4 per cent, he said.

Qatari citizens can borrow no more than 2 million riyals ($549,254) on loans with a maximum maturity of six years, Al-Sharq reported April 11, without saying how it obtained the information. Residents can borrow as much as 400,000 riyals on loans of no more than four years. The interest rate was capped at 6.5 per cent, the newspaper said.

A 1 per cent lower yield on the retail loan book would erode the net income of Qatar National Bank SAQ, the country's biggest lender by assets, by 2.5 per cent, Credit Suisse said. Commercial Bank's profit would reduce by 4.3 per cent and Doha Bank's earnings by 8.4 per cent, Hawa wrote. Doha Bank has the highest exposure to personal lending with 31 per cent of total loan book.

Qatar National Bank said April 11 the lender complied with the central bank's directive on loans granted against salaries, including reducing the interest rate charged on loans granted against salary to be at a maximum of 6.5 per cent.

Bloomberg News