Qatar’s banking sector is expected to see a decline in the cost of risk by 2027, supported by a robust domestic economy and favourable funding conditions for corporate borrowers, according to a report by Standard & Poor’s (S&P).
The rating agency projected the cost of risk to fall to around 70-80 basis points by 2027. “This reflects a supportive economic environment and more accommodative funding conditions for corporate borrowers,” S&P said.
Strong growth in Qatar’s liquefied natural gas (LNG) sector is expected to underpin the outlook. The North Field Expansion project is forecast to boost LNG output by approximately 32 percent by 2027, contributing to average real GDP growth of 5 percent between 2026 and 2028, up from 2.7 percent in 2024-25. Higher LNG production is also expected to support government revenues and the non-hydrocarbon economy.
The report noted that anticipated interest rate cuts by the US Federal Reserve in the second half of 2026 would likely be mirrored by the Qatar Central Bank, given the riyal’s peg to the US dollar. S&P expects these moves to cause a modest decline in banks’ net interest margins. Alongside higher corporate tax payments under the Base Erosion and Profit Shifting (BEPS) Pillar Two framework, bank profitability is projected to dip, with return on assets estimated at 110 basis points in 2026-27, down from 140 basis points in 2025.
Despite this, Qatari banks are expected to maintain strong capitalisation, with an average Tier 1 capital ratio of 19.5 percent as of September 30, 2025. Capital quality remains solid, with only about 15 percent of total capital comprised of hybrid instruments. System-wide coverage ratios stood at roughly 128 percent in September 2025 and are expected to remain above 100 percent through 2027.
Non-performing loans (NPLs) are projected to decline slightly, with the system-wide average NPL ratio falling to around 3.4 percent in 2026-27 from an estimated 3.7 percent in 2024-25. While some mid-sized banks continue to face elevated NPLs due to real estate exposures, S&P expects new problem loans to remain modest as the real estate sector gradually improves. Interest rate cuts, precautionary provisions, and a combination of recoveries and write-offs should help stabilise asset quality.
Qatari banks’ direct exposure to sectors vulnerable to the global energy transition, such as oil and gas, stood at about 6 percent of total loans in November 2025. S&P said the country’s position as a low-cost LNG supplier positions it to remain competitive even after 2030, supporting the sector’s resilience through the transition away from fossil fuels.
The agency noted that while Qatar’s economy and banks are exposed to shifts in oil and gas prices, the sector’s strong cash flows and access to international debt markets limit reliance on domestic banks, reinforcing confidence in the banking system’s stability.
