MEED’s annual table of Gulf bank results leaves few doubts about which institutions dominate the region. In 1994, the combined assets of the top three banks – Arab Banking Corporation (ABC), National Commercial Bank (NCB) and Riyad Bank – accounted for one quarter of the total assets of the 68 banks listed. There were also few changes when compared with the rankings in 1993 (see pages 34-43).

But the largest banks have not been able to dominate the rankings when it comes to performance. Saudi American Bank (Samba) reported the highest profits for 1994, but ABC, even with the largest balance sheet, ranked only seventh. In terms of return on equity and assets, it is the smaller banks which have taken the lead, with Oman and the UAE showing a strong presence in these rankings.

The MEED table reflects the tougher time that most banks experienced last year. As assets rose 7 per cent in 1994 to $204,881 million, total profits fell by 1 per cent to $2,665 million.

The banks found more lending opportunities last year, as total loans and advances rose 13 per cent to $75,611 million. Lending as a proportion of total assets also rose slightly during the year, but at about 40 per cent still suggests banks have spare capacity to increase their loan portfolios. Total customer deposits increased more slowly, rising 5 per cent to $131,463 million and total shareholders’ equity rose by 6 per cent to $22,541 million.

A breakdown of the figures is given below:

Assets/liabilities: ABC is at the top of the table with the largest balance sheet of any bank in the region, with assets of $19,517 million. This is almost three times the size of the tenth largest bank. Saudi Arabian banks account for five of the top 10 institutions in terms of assets, with NCB and Riyad Bank ranked second and third. National Bank of Abu Dhabi (NBAD) ranked tenth in 1994, after being number 12 in 1993.

Loans and advances: The ranking in terms of loans and advances is once again topped by ABC, and dominated by Saudi Arabian banks. However, NBAD, which was ranked ninth in 1993, climbed to fourth in 1994. NBAD reported a sharp rise in its loans portfolio in the second half of 1994, ending the year on $4,766 million compared to $2,619 million in 1993.

Customer deposits: NCB reported the largest customer deposits at $14,097 million, well above its closest rival, ABC, at $8,487 million. Of the six Saudi Arabian banks in the top 10, Al Bank Al Saudi Al Fransi and Saudi British Bank reported lower customer deposits in 1994. This reflected an overall decline in customer deposits with Saudi financial institutions in 1994.

Shareholders’ equity: Seven Saudi banks were in the top 10 for shareholders’ equity, with NCB at the head of the table with equity of $1,895 million. NCB was recapitalised by its main shareholders, the Bin Mahfouz family, in 1992 with a cash injection of SR

6,000 million ($1,602 million).

Net profit: The highest profits in 1994 were reported by Samba, which recorded net income of $271 million. The bank also topped the table in 1993, with earnings of $252 million. However, further down the table, the rankings changed in 1994. Al-Rajhi was third in 1993, but announced the second highest profits in 1994 with $234 million. Riyad Bank and ABC both fell two places in 1994 to fourth and seventh positions, respectively. MashreqBank, on the other hand, moved up from fifteenth to tenth in 1994, after increasing profits by 21 per cent to $82 million.

Return on equity: Samba maintains its position at the top of the list, reporting the highest return on equity in 1994. Two other Saudi banks, United Saudi Commercial Bank and Al-Rajhi, were in the top 10, ranked eighth and ninth, respectively. However, the list also includes three Omani banks: Oman International Bank (OIB), Oman Arab Bank and Bank Muscat Al Ahli Al Omani. A relatively low capital base has helped push OIB and Bank Muscat into their respective positions, a situation that is likely to change this year as Omani banks raise their paid-up capital.

Return on assets: The top rankings in terms of return on assets are dominated by UAE banks, accounting for five out of the 10 best performers. Included among the UAE banks is National Bank of Sharjah, which released a full balance sheet in June of this year for the first time since 1988. TAIB Bank reported a strong performance in 1994, rising to ninth in the rankings last year compared with its position mid-way in the table in 1993. This is partly because the bank’s assets fell in 1994 as the management pursued a strategy that will focus on its merchant banking activities. Al-Rajhi was the top performing Saudi bank in terms of return on assets in 1994, but was only tenth in the regional rankings.

At the lower end of the scale, Bahrain-based Gulf Riyad Bank has fallen further down the rankings. The bank is now managing only existing assets until the main shareholders – Riyad Bank and Credit Lyonnais – decide on the future of the institution. Three UAE

banks are also at the bottom end of the rankings: NBAD, Dubai Islamic Bank and Commercial Bank International. However, one of the strongest turnarounds was reported by the UAE’s Investbank which was third from the bottom in 1993, but recovered to become a mid-range performer in 1994.

Equity/assets ratio: Some of the most heavily capitalised banks are found in the UAE. Three banks from the northern emirates – First Gulf Bank, National Bank of Fujairah and National Bank of Umm al-Qaiwain – reported total shareholders’ equity equivalent to 30 per cent of total assets. However, the top rankings are dominated by offshore institutions.

The lower rankings include two major regional institutions, ABC and Gulf International Bank. The banks reported equity/asset ratios of 7.29 per cent and 7.37 per cent, respectively, in 1994. Saudi Arabia’s Bank Al- Jazira was at the bottom of the table in 1993, but rose to a middle ranking in 1994. This followed a process of restructuring under new management at the bank.

Loans/assets ratio: The list of 10 banks with the highest ratio of loans to assets is dominated by Omani institutions. Oman’s seven commercial banks have experienced a surge in demand for consumer loans, and have responded with a rapid expansion of their loan portfolios. Central bank regulations allow Omani banks to lend up to 75 per cent of their customer deposits and shareholders’ equity, in addition to 10 per cent extended against letters of exchange. As a result, loans and advances can make up almost 85 per cent of a bank’s assets. The UAE banking community is also relatively highly lent compared with other countries in the region, and was also responding to strong demand for consumer loans.

The most underlent institutions in relation to assets are Kuwaiti banks, mainly because a large percentage of the banking community’s assets are tied up in low yield government bonds. These bonds were offered to the banks by the government in return for non-performing loans.