Qatari banks’ median price-to-tangible book discount of almost 20% vs. the historical average may get support from rethinking the equation between real-estate oversupply risks and robust macro, bolstered by an above $80 oil price. The banks’ strong balance sheets also helps. A narrowing of the net interest margin (NIM) gap vs. Gulf peers could support relative valuation too, with the banks at about a 10% discount vs. long-term trends.
Closing NIM gap, strong oil prices could aid valuation
Qatari Banks’ relative valuation, currently trailing Gulf peers, could get a boost if cyclical factors, particularly net-interest-margin differentials, gradually diminish. Driven by relatively stable NIMs, the sector’s margin lags Gulf peers that have had a rate-hike boost, though this gap is likely to normalize over time. Lingering asset quality concerns, stemming from oversupplied real estate, also contribute to subdued valuations, with banks trading at a price-to-tangible book discount of 17% (median) vs. their 10-year average. Geopolitical tensions and potential travel disruptions could heighten real-estate risks, with medium-sized banks (CBQ, QIB, MARK and Dukhan) more exposed. However, oil prices above $80 and the dominance of the public sector may help mitigate potential losses.
Bloomberg
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