Qatar Injected $43 Billion to Help Banks After Boycott, S&P Says

  • About $22 billion of deposits flowed out of country’s lenders
  • Ratings agency expects outflows to continue this year

Skyscrapers stand on the city skyline in Doha, Qatar.

Photographer: Gabriela Maj

Qatar pumped about $43 billion into banks last year after a Saudi Arabia-led boycott caused a drop in deposits, S&P Global Ratings said.

The government and state-controlled companies injected the cash into the financial system after about $22 billion of deposits flowed out of the country between June and December, Mohamed Damak, S&P’s senior director for financial services, said in Dubai on Tuesday.

Qatar has since June been involved in a standoff with neighboring states, who accuse the nation of supporting terrorism. Qatar has repeatedly denied the charges. The world’s biggest exporter of liquefied natural gas relies on foreign deposits to support its banking system after a drop in oil prices tightened liquidity. It also plans to spend $200 billion to host the 2022 soccer World Cup.

The government intervened “quite strongly” to help banks and allow them to increase lending and finance government projects, Damak said. Banks and institutions from neighboring countries that are part of the boycott pulled most of the deposits, while nervous investors outside of the region also withdrew funds, he said.

Damak expects outflows from the Gulf countries involved in the standoff to continue this year and said the banks can withstand the withdrawals because they hold between 20 percent to 40 percent of their assets in liquid securities.

Damak also said:

  • S&P expects Gulf Cooperation Council banks’ net interest margins to decline “slightly” this year from 2.8% in 2017 as the cost of funding rises on U.S. interest rate hikes
  • Sees cost of risk at GCC banks rising from ~120bps as a result of implementation of IFRS 9 rules, a new method for providing for bad loans to be adopted from this year
  • Sees average loan growth of 3%-4% at GCC banks in 2018, improving from an average 2.6% in 2017 as economic growth rebounds
  • Expects stable ratings for GCC banks
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