The Qatar Financial Centre (QFC)-domiciled corporate banks' exposure to the local market remained the largest segment at 54% of the total during 2020; indicating the significant contribution of the centre to the domestic economy.
The local exposure during 2020 improved slightly from 53% the previous year, said the annual report of the QFC Regulatory Authority, which was released recently.
The proportion of exposure to China reduced (14% in 2020 against 23% in 2019); while the exposure to the Russian federation and Kazakhstan increased in 2020 compared to 2019.
The report said the exposure to the Gulf Co-operation Council-excluding Qatar remained constant, while that to the Middle East and North Africa (excluding GCC) reflected a marginal decline. The exposures to the US, the UK and Europe remained relatively small, it said.
The QFC-domiciled corporate banks’ net interest income improved year-on-year during 2020 with a “significant” increase in the second half of 2020.
“This was primarily due to the increased net interest margins that resulted from reduced funding cost,” the annual report said.
The interest cost and interest yield both reflected a decreasing trend during 2020, even as the decline in funding costs was “slightly” higher, it said, adding “as a result, the net interest margin widened during 2020”.
Although the overall profitability was high during 2020 against that during 2019, the report said this was weighed down by increase in credit losses as provisions were adjusted to reflect the effects of the Covid-19 pandemic and the resultant impact on asset quality.
The QFC-domiciled corporate banks' gross exposure to financials and basic materials remained at 52% of the total gross exposure during 2020 compared to 56% during 2019.
The sectoral exposure to the oil and gas "significantly" increased from 1% during 2019 to 10% at the end of 2020, the report said, adding the exposures to the construction and transport represented a smaller proportion of the overall distribution.
The total assets of the QFC-domiciled corporate banks increased 12.6% year-on-year during 2020.
Loans and advances - which remained the largest component, representing 67.7% of the total assets - grew 15.2% year-on-year primarily due to a 22.8% increase in term loans. Loans and advances mainly comprised terms loans and trade bills.
The investments were the second largest component, representing 24.1% of the total assets, at the end of December 2020.
The overall liabilities, as of December 2020, expanded 12.1% year-on-year, attributed to intra-group funding and term debt, the annual report said.
The intra-group funding remained the key financing source, representing 65.8% of the total liabilities at the end of 2020, a decrease from the prior year's level of 73.6%.
The proportion of term debt to total funding increased "notably" during 2020, growing from 13% to 24.6% at the end of December 2020.
The deposits and current account, comprising fixed and notice deposits, decreased to 8.9% of the total liabilities compared to 12.6% as of year-end 2019.
The corporate banks' reliance on funding sourced from banks increased to 78.9% during 2020 compared to 71.8% the prior year.
The proportionate funding contribution from securities and investment firms fell to 9.1% during 2020 compared to 12.8% the previous year, "opt up" business customers (4.2% and 6.2%) and corporates (5.7% and 6.1%).
Similarly, the proportionate funding from corporate, public sector entities and high net-worth individuals declined slightly during 2020; whereas funding sourced from small and medium-sized enterprises increased during the review period.