QNB's second-quarter profit falls after loan provisions more than double

DUBAI (Reuters) - Qatar National Bank's QNBK.QA second-quarter profit fell after it booked sharply higher loan loss provisions due to the global economic conditions, the Gulf's biggest lender said on Sunday.

FILE PHOTO: An ATM is seen outside the building of Qatar National Bank in Doha, Qatar January 16, 2018. REUTERS/Stringer

Fitch Ratings said last month that it expected Qatar’s non-hydrocarbon sector to contract by 5% this year and gross domestic product to shrink 3.8%.

QNB posted 2.84 billion riyals ($779.90 million) in net profit in the second quarter, down from 3.83 billion riyals a year earlier.

The second-quarter figure was lower than EFG Hermes’ forecast of 3.316 billion riyals for QNB, which operates in more than 31 countries, including large operations in Turkey and Egypt.

Mohamed Damak, a senior director at S&P, told Reuters he expected Qatari banks’ profitability to take a hit due to lower interest margins and higher cost of risk.

“We expect a low to mid-single digit lending growth in 2020 for Qatari banks, as the economy contracts and banks focus more on preserving their asset quality indicators rather than generating new business. We also expect the asset quality indicators and cost of risk to deteriorate,” he said.

QNB increased its loan loss provisions in the second quarter to 1.5 billion riyals from 605.5 million a year earlier.

“Considering the global economic conditions, QNB Group opted to increase the loan loss provisions during the first half of 2020 by 1.2 billion riyals ($320 million) to protect the Group from any adverse shocks in the loan book,” the lender said.

“This affected overall profitability for the group.”

QNB, which serves more than 20 million customers, is 50% owned by Qatar’s sovereign wealth fund, the Qatar Investment Authority.

Reporting by Yousef Saba and Saeed Azhar; editing by David Evans and Emelia Sithole-Matarise