New rules may hit Qatari banks hard

Qatar Islamic Bank reported a 7 per cent gain in profits for the first quarter, but still missed analyst estimates. Looking forward Qatari lender will be affected by a central bank circular issued that places a cap on loans and interest rates for expats and Qatari nationals, analysts said.

A new restriction on how much Qatari banks can lend is likely to affect their profitability.

Among the banks affected will be Qatar Islamic Bank (QIB), which reported a 7 per cent gain in profits for the first quarter on Wednesday compared with the same period last year. Those results, which do not reflect the new lending rules, missed analyst estimates as net financing gains were offset by declines in fee income.

Net income for QIB rose to 321 million rials, from 300m rials in the same period last year, according to a filing from the Qatar Exchange. Analysts estimated a quarterly profit of 344.3m rials, according to a Reuters poll. Net financing income grew 8.6 per cent to 457 rials, while fee income dropped 22 per cent to 65m rials on the same period last year.

QIB shares lost 2.8 per cent to 81.20 rials yesterday, the first day of trading since the earnings were released.

Loan growth for the bank declined by 16 per cent quarter on quarter. Analysts found the numbers disappointing compared with the country's largest lender, Qatar National Bank, which said its loan book grew by 19.5 per cent during first quarter compared with the final quarter of last year.

QIB is among the lenders expected to be affected by Qatar's central bank circular putting a 400,000 rials ceiling on personal loans to expatriates, and dropping the loan limit for a Qatari national to 2m rials, from 2.5m rials. The circular also capped the interest rates on all personal loans at a maximum of 6.5 per cent, compared with current rates of up to 10 per cent.

"QIB will be the third most impacted bank [by the circular], because retail loans account for 17 per cent of their total loan book, while Doha Bank is at 32 per cent and Commercial Bank of Qatar is at 20 per cent," said Tarik el Mejjad, a banking analyst at Nomura in London.

"Assuming all things constant, the bank's net interest income will take a 12 per cent hit from the circular," Mr el Mejjad said.