Some regional banks are being scrutinised more closely over non-performing loans at a time when revenues are expected to remain under pressure. Doha Bank, the third-largest lender in Qatar, is one such bank. Credit Suisse said in a note yesterday it was "in particular cautious" on Doha Bank, given its low coverage of non-performing loans (NPLs), which stood at 67 per cent in the first quarter of this year. The bank had covered 50 per cent of its NPLs in the final quarter of last year. Doha Bank booked provisions of 17.54 million rials in the first quarter of this year - 2.78m rials towards impairment losses on financial investments and 14.76m rials for provisions against losses on loans and advances.
Credit Suisse expects Doha Bank's net income to slide by 25.7 per cent in the second quarter of this year to 234m rials, down from 315m rials in the first quarter. The bank reported a 9.4 per cent drop in operating income in the first quarter this year and analysts say it may see further weakness in the second. One particular concern for the Qatari banking sector is the sluggish growth in loans. "We are looking at monthly data for Qatari banks and we are not seeing anything interesting that suggests an improvement in loan growth," said Yazan Abdeen, a fund manager at ING Investments in Dubai.
The weak numbers are less likely to affect the bank's share price, which has lost almost 14 per cent of its value in the second quarter, said Ali Khan, the head of equities at Arqaam Capital in Dubai. "We have a weak consensus number out but I think it is mostly priced in considering the drop in share prices since the first quarter," Mr Khan said. Doha Bank shares are down 17 per cent from their peak in October last year. They closed 1.1 per cent higher at 44.90 rials yesterday in a broadly positive bourse.