DUBAI: Qatar National Bank, the Gulf's biggest bank by assets, on Tuesday reported a drop in annual profit of more than 16%, hit by $1.6 billion in impairments during a year when the region's economy was affected by the coronavirus outbreak.

Gulf banks have faced a slowdown in business and a rise in loan impairments as Covid-19 hit the region. The outlook for 2021 is uncertain due to the protracted nature of the economic recovery.

QNB reported a net profit of 12 billion riyals ($3.20 billion)in 2020, it said in a statement, down from 14.4 billion riyals in 2019.

The profit was slightly above the mean forecast of 11.7 billion riyals by seven analysts, based on Refinitiv data.

"Considering the long-term financial impacts of Covid-19, QNB Group decided to set aside an additional 5.8 billion (riyals) in respect of loan loss provisions as a precautionary measure, which affected the net profit for the year," the bank said. In 2019, impairments were about 3.2 billion riyals.

Qatar's economy is expected to grow by 3% this year as an easing of a three-year-old regional dispute will help trade, tourism, and logistics, Standard Chartered said on Jan. 6, revising its previous 2.1% growth estimate.

Saudi Arabia and its Arab allies agreed earlier in January to end a boycott imposed in mid-2017 over allegations that Qatar supports terrorism, charges it has denied.

Qatar's economy is projected to have contracted by about 2.5% in 2020, the International Monetary Fund has said.

Despite the pandemic, QNB said its total assets increased to a record 1 trillion riyals, driven by a 7% rise in loans and advances.

QNB improved its cost to income ratio from 25.9% to 24.3% which the bank said is considered one of the strongest ratios among the large financial institutions in the Middle East and Africa region.