meed-logo

line1 line2 line3
SIGN IN / REGISTER

Qatar banks look to calmer waters in 2025

15 January 2025

 

Doha’s lenders enter 2025 with a sense of quiet confidence, backed by broadly favourable macroeconomic trends shaped by still-solid oil prices and non-oil growth that will provide an uplift for operating conditions and loan growth.

Although these operating conditions are not as supportive for Qatari banks as for their peers in the UAE and Saudi Arabia, growth is nonetheless coming back to the sector, enabling banks to book more loans.

Credit growth is looking stronger. In the first 10 months of 2024, Qatari banks registered an annualised credit growth of 6.3%, more than double that of 2023, which was 2.9%.

“Resuming growth is supporting operating conditions for Qatari banks,” says Amin Sakhri, primary rating analyst at Fitch Ratings.

According to Sakhri, non-oil economic activity is also increasing. But it is the cornerstone hydrocarbons project, the North Field liquefied natural gas (LNG) expansion, that will likely give ballast to lenders in the next two to three years.

By the end of 2025, Qatari LNG production capacity will have risen to 110 million tonnes a year (t/y), ahead of a further increase to 126 million t/y by 2027. That sets the economy up well, with banks positioned to feel the impact.

“The LNG project, which benefits related sub-sectors, also supports credit growth. So there’s also another supportive element for Qatari banks,” says Sakhri.

Robust profitability

Profits have been healthy in the past year, benefitting from banks’ strong capitalisation levels and adequate liquidity.

Ratings agency Standard & Poor’s (S&P) expects this trend to continue with only a modest drop in net interest margins owing to interest rate cuts – and the impact of replacing non-resident funding (which is high in Qatar relative to other regional banking sectors) with higher-cost domestic funding sources.

Full-year 2024 results are awaited, but indications are it will have proved another solid year for banks’ bottom lines.

Qatar National Bank (QNB), which represents over 50% of total system assets – with just eight domestic commercial banks, it is one of the Gulf’s most concentrated banking sectors – reported a Q3 2024 net profit of QR4.5bn ($1.23bn), a 5.4% increase over the previous year. Loans and advances were up by 11% in the same period.

Profits were helped by still high interest rates in the first half of the year. While the lower interest rate environment will have some erosion effect on margins, Qatari banks are generally less sensitive to rates than other banks in the region.

Other metrics also look healthy. “We’ve seen the return on average equity increasing to 16.7% from 15.8% in 2023. This is despite still high loan impairment charges in Qatar, which are some of the highest in the GCC,” says Sakhri.

Property market uncertainty

One area of weakness is in the real estate sector, which has suffered from excess supply over a number of years, bringing down prices. According to Fitch, the banking sector’s exposure to the real estate and contracting sectors remains high, representing 17% of total sector lending.

“The real estate and construction sectors remain under pressure, and we see that in the banks’ loan books,” says Sakhri. “The cost of risk is still elevated in a GCC context, at 78 basis points in the first nine months of 2024 for the Qatari banking sector as a collective, well above the level observed in the UAE and Saudi Arabia.”

Those real estate pressures have contributed to higher loan impairment charges compared to the rest of the region. S&P envisages non-performing loans (NPLs) remaining elevated at 4% in 2025.

“If you look at stage 2 loans, the average for the Qatari banking sector is around 10-11%, whereas for the UAE and Saudi, it’s about 5%. Some of the smaller banks are heavily exposed to the real estate and construction sectors, leading to about a third of the loan book being classified as Stage 2, which is quite substantial,” says Sakhri.

However, Qatari lenders have tightened their underwriting standards in the real estate and contracting sectors, focusing on government-related projects and assignment of cash flow proceeds to reduce their repayment risks, notes Fitch. Some banks have also been reducing their exposure to these sectors.

In S&P’s view, while continued pressure on real estate prices could accelerate the migration of stage 2 loans to NPLs at some midsize banks, public sector initiatives and interest rate cuts will help prevent a more severe deterioration in asset quality.

Underlying strength

In any case, the sector’s strong capitalisation and conservative provisioning remain two core strengths. The average CET1 stood at a solid 15.5% at the end of September 2024. This, says Fitch, is further supported by strong provisioning practices, with 140% of stage 3 loans covered by provisions, among the strongest in the GCC.

Aside from the real estate exposure, the other key risk in Qatar is its long-standing reliance on external funding. The sector’s non-resident funding accounted for a still-high 42% of the banking sector’s funding at the end of October 2024, and the sector’s net external funding was a substantial 50% of GDP at the end of 2023.

There has been some change as GDP has grown, meaning total funding relative to GDP is decreasing. However, about half of the sector’s funding comes from external sources, which is not expected to reduce significantly.

“Yes, hydrocarbon revenues have been supporting domestic liquidity, but Qatari banks are really quite reliant on external funding. In Saudi Arabia and the UAE, you’re looking at 15%-20% coming from external funding, and Qatar has been traditionally more than twice that,” says Sakhri.

Looking forward, the broader positive impact from the LNG increase will provide improved operating conditions for Qatari lenders, which will impact on banks’ bottom lines – offsetting the lower credit demand that will result from the completion of a number of key infrastructure projects.

What’s more, notes Sakhri, lower rates mean the cost of funding will reduce, which is favourable for Qatari banks because they have some of the highest cost of funds in the GCC, and the impact on net interest margin will be less marked. 

Put that together, and Qatari bank chiefs have reason to view the year as one in which the glass is half-full rather than half-empty.

MEED's February 2025 special report on Qatar includes:

> GOVERNMENT & ECONOMY: Qatar economy rebounds alongside diplomatic activity 
> POWER & WATER: Facility E award jumpstarts Qatar’s utility projects
> DOWNSTREAM: Qatar chemical projects take a step forward

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/13260830/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Local firm executing Yasref tail gas treatment project

    14 April 2026

     

    Yanbu Aramco Sinopec Refining Company (Yasref) is overseeing progress on a key project to build a tail gas treatment unit (TGTU) at its crude refinery complex, located in Yanbu on the west coast of Saudi Arabia.

    Yasref is a joint venture in which Saudi Aramco owns the majority 62.5% stake and China Petroleum & Chemical Corporation (Sinopec) owns the other 37.5%. The Yasref refinery was commissioned in 2015 and has a crude oil refining capacity of 400,000 barrels a day (b/d).

    The aim of the project, which Yasref calls the tail gas synergy project, is to significantly reduce emissions of sulphur dioxide (SO₂) and hydrogen sulphide (H₂S) from its production complex. The 'synergy' comes from integrating primary treatment (such as the Claus process, which typically recovers about 95-97% of sulphur) with advanced secondary treatment in a TGTU, to achieve overall sulphur recovery of nearly 99.9%.

    Yasref awarded the main contract for the tail gas synergy project to Jeddah-based contractor Carlo Gavazzi Arabia earlier this year, according to information obtained by MEED Projects, with the contract estimated at $80m.

    The local branch of London-headquartered Berkeley Engineering Consultants is acting as the project’s main consultant, according to MEED Projects.

    The scope of work on Yasref’s tail gas synergy project includes the following:

    • Construction of downstream TGTU with catalytic hydrogenation reactor and amine absorber train
    • Modification of existing sulphur recovery units
    • Construction of acid gas removal units employing amine solvent systems
    • Construction of desulphurisation units including carbonyl sulphide hydrolysis
    • Construction of associated utilities and auxiliary infrastructure: thermal exchangers, power and steam supplies, flare knockout drums
    • Installation of safety and security systems hydrogen sulphide detection, overpressure relief, firewater deluge, access control, safety instrumented systems
    • Integration of emission monitoring and process control instrumentation.

    In April last year, Aramco, Sinopec and Yasref signed a venture framework agreement for a potential petrochemicals expansion of the Yasref refinery complex into a major integrated petrochemicals facility. The project would include a large-scale mixed-feed steam cracker with a capacity of 1.8 million tonnes a year (t/y) and a 1.5 million-t/y aromatics complex, along with associated downstream derivatives.

    MEED understands that the Yasref petrochemicals expansion project, which is also referred to as Yasref+, is part of Aramco’s $100bn liquids-to-chemicals programme.

    The central ambition of the strategic programme is to derive greater economic value from every barrel of crude produced in Saudi Arabia by converting 4 million b/d of Aramco’s oil production into high-value petrochemicals and chemicals feedstocks by 2030.

    ALSO READ: Saudi downstream projects market enters lean period
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16383830/main3043.jpg
    Indrajit Sen
  • Kuwait sets April deadline for $718m drainage tender

    14 April 2026

    Kuwait’s Ministry of Public Works has set a 21 April deadline for a major tender estimated to be worth about KD222m ($718m).

    The tender scope covers the construction of rainwater drainage networks across the residential areas of Sabah Al-Ahmad, South Sabah Al-Ahmad, Al-Khairan and Al-Wafra.

    The Ministry of Public Works floated the tender on 22 March.

    According to regional projects tracker MEED Projects, the works include the construction of a major concrete sewer, three collection basins and extensive stormwater drainage basins.

    Rainwater collection tanks will be connected through an independent network, with outlets to the sea via the Nuwaiseeb exit to manage overflow.

    The infrastructure will also filter pollutants such as oils, minerals and sediments to protect water quality and support environmental sustainability.

    The project aims to reduce surface runoff, prevent street and urban flooding, and improve groundwater recharge.

    UK analytics firm GlobalData expects Kuwait’s construction industry to grow by 5.1% in 2026-29, supported by government investment in the oil and gas sector aimed at raising production, as well as investment in the infrastructure sector.

    In the short term, growth will be boosted by planned expenditure under the 2025-26 budget, which was approved in March 2025.

    The construction industry in Kuwait is expected to record an annual average growth rate of 4.9% in 2026-29, supported by investments in renewable energy, transport, and oil and gas projects.

    READ THE APRIL 2026 MEED BUSINESS REVIEW – click here to view PDF

    Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

    Distributed to senior decision-makers in the region and around the world, the April 2026 edition of MEED Business Review includes:

    > GCC CONTRACTOR RANKING: Construction guard undergoes a shift
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16383203/main.jpg
    Yasir Iqbal
  • Local firm makes hydrocarbon discovery in Oman’s Block 7

    14 April 2026

    Omani oil and gas exploration and production company Masar Petroleum has announced a discovery in the Hasirah Ridge in the sultanate’s Block 7.

    Masar Petroleum was the inaugural operator to appraise and produce hydrocarbons from the Hasirah reservoir in Block 7 in 2017.

    Building on that experience, Masar Petroleum has now successfully drilled a new exploration well south of its existing discoveries, validating the concept of the Hasirah Ridge — a geological trend 5 kilometres wide and 30km long mapped across Block 7 using 2D seismic data.

    This discovery represents the first step towards unlocking the Ridge’s prospective resource base of 100 million to 380 million barrels, Masar Petroleum said in a statement.

    Following this discovery, a planned 3D seismic survey and exploration and appraisal programme is expected to advance the development of the new resources by the end of 2028.

    First production from this field is expected to come on stream during the last quarter of this year.

    Masar Petroleum plans to rapidly advance appraisal and development opportunities across Block 7.

    “Masar is a proud Omani E&P company that has delivered significant value through a continuous and focused effort on unlocking our potential,” Abdulsattar AlMurshidi, CEO of Masar Petroleum, said.

    ALSO READ: Oman offers five hydrocarbon exploration blocks in new bidding round
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16383075/main2121.jpg
    Indrajit Sen
  • Bidders get more time for Saudi water transmission projects

    14 April 2026

     

    Saudi Arabia’s Water Transmission Company (WTCO) has extended the bid submission deadlines for engineering, procurement and construction (EPC) contracts for two major independent water transmission system projects.

    The Jubail-Buraidah and Ras Mohaisen-Baha-Mecca transmission projects were first tendered last September under the public-private partnership model.

    The deadlines for qualified contractors to submit technical and financial bids had initially been extended to March. 

    The new bid submission deadline for the Jubail-Buraidah project is 30 April.

    Scheduled to begin construction in 2027, the scheme comprises an approximately 348-kilometre-long greenfield water transmission system with a capacity of 840,650 cubic metres a day (cm/d), delivering water from the Ashmasiah reservoirs to cities and towns in Al-Qassim province.

    The project is large by WTCO standards. The company’s second phase of the Khobar-Hofuf system, completed in 2024, was 140km in length, with a capacity exceeding 530,000 cm/d. 

    Ras Mohaisen-Baha-Mecca

    For the Ras Mohaisen-Baha-Mecca water transmission system project, the new bid submission deadline is 7 May.

    The project involves constructing an approximately 325km-long greenfield independent water transmission system with a capacity of 542,000 cm/d, delivering water from Ras Mohaisen to the Adham and Aradhiyah regions.

    Prequalification for both projects closed on 15 January.

    It is understood that local firms Alkhorayef Water & Power Technologies and Mutlaq Al-Ghowairi Contracting Company (MGC) are among those qualified to bid for the Ras Mohaisen contract.

    MGC secured the EPC contract for an even larger independent water transmission pipeline project in June last year.

    The project, also linking Jubail and Buraidah, spans 587km and carries 650,000 cm/d.

    According to regional project tracker MEED Projects, construction works recently commenced on the project, which is estimated to cost about SR8.5bn ($2.2bn).

    WTCO is also planning to tender a contract for phase two of the Ras Mohaisen water transmission system project. This includes laying water transmission pipelines 408km in length with a capacity of 400,000 cm/d. This project is estimated to cost around $600m.

    It is understood that the main contract tender will be issued in 2027.

    READ THE APRIL 2026 MEED BUSINESS REVIEW – click here to view PDF

    Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

    Distributed to senior decision-makers in the region and around the world, the April 2026 edition of MEED Business Review includes:

    > GCC CONTRACTOR RANKING: Construction guard undergoes a shift
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16383056/main.jpg
    Mark Dowdall
  • Saudi firm wins $64.2m steel pipe orders from Aramco

    14 April 2026

    Saudi Arabia-based Arabian Pipes Company has announced it has won orders from Saudi Aramco to supply steel pipes, totalling SR241m ($64.2m).

    Under the terms of the contracts, Arabian Pipes Company will supply steel pipes over contract durations of nine months and 11 months, commencing from the date of signing.

    “These contract awards reinforce Arabian Pipes Company’s strong position as a key supplier to the kingdom’s energy sector and highlight its continued commitment to supporting major oil and gas infrastructure projects in Saudi Arabia,” the company said in a filing with the Saudi Exchange (Tadawul), where its shares trade.

    The company added that the orders will contribute positively to its financial performance over the contract period.

    Arabian Pipes Company last secured a contract from Aramco in August 2024, when it won an eleven-month steel pipe supply order worth approximately $28.53m.

    Prior to that, in July 2024, the company won a contract worth SR293m ($78.1m) to supply steel pipes for the second expansion phase of Aramco’s Jafurah unconventional gas development. That contract had a duration of 10 months.

    The order was placed as a subcontract by Denys Arabia, the main contractor performing engineering, procurement and construction works on one of the Jafurah second expansion phase project packages.

    MEED’s April 2026 report on Saudi Arabia includes:

    > COMMENT: Risk accelerates Saudi spending shift
    > GVT &: ECONOMY: Riyadh navigates a changed landscape
    > BANKING: Testing times for Saudi banks
    > UPSTREAM: Offshore oil and gas projects to dominate Aramco capex in 2026
    > DOWNSTREAM: Saudi downstream projects market enters lean period
    > POWER: Wind power gathers pace in Saudi Arabia
    > WATER: Sharakat plan signals next phase of Saudi water expansion
    > CONSTRUCTION: Saudi construction enters a period of strategic readjustment
    > TRANSPORT: Rail expansion powers Saudi Arabia’s infrastructure push

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16382513/main2830.jpg
    Indrajit Sen