Lenders struggle to maintain profits during first quarter
GCC banks experienced a difficult first quarter, with several large financiers, as well as many smaller lenders, reporting declines in profit.
National Bank of Abu Dhabi (NBAD) saw its net profits fall 11 per cent compared with the first quarter of 2015, to $346m, as revenues declined 1 per cent over the same period, to $722m. Its total lending remained flat at AED200m ($54.5m) as it changed focus from trade finance to higher-yield liquid investments.
The worst-performing sector was wealth management, where revenues declined by 10.7 per cent year-on-year. Revenues from NBADs retail and commercial business grew 19.4 per cent over the same period, compensating for wealth management and wholesale, which also declined by 3.3 per cent.
Operating conditions are widely said to be more difficult as economic growth slows and liquidity tightens. Asset quality is expected to deteriorate over the next year, but was maintained in many banks so far.
Despite these concerns, Qatar National Bank and Dubais Emirates NBD managed to continue to increase their profits by 7 and 8 per cent respectively.
In Saudi Arabia, National Commercial Bank managed to increase its profits by 1 per cent to $702m, thanks to an increase in fees and commission. Its loanbook grew 16.8 per cent year on year, despite a 4.9 per cent fall in deposits.
Al-Rajhi Bank saw its profits increase 32.8 per cent in the first quarter of 2016 year-on-year to $549m, although the first quarter of 2015 saw a poor performance from the lender. Its Islamic finance portfolio climbed by 5.5 per cent, while deposits fell by 1.4 per cent.
National Bank of Kuwaits net profit fell 18.2 per cent to $261m, after non-interest income fell by 38.5 per cent. Adjusted for the one-off sale of a 30 per cent stake in International Bank of Qatar (IBQ), net profits grew 6.7 per cent year-on-year. Lending increased 9.6 per cent year-on-year, and deposits 4.9 per cent.
Among medium-sized banks, Saudi Arabias Samba Financial Group saw its net profit fall 1.4 per cent to $336m.
Abu Dhabis First Gulf Bank (FGB) also saw net profit decline by 6.3 per cent to $362m year-on-year. Fee income fell by 19 per cent due to a slowdown in transactions, while interest and Islamic finance income was flat. Loan growth slowed 7 per cent year-on-year while deposits fell by 2 per cent.
Abu Dhabi Commercial Banks net profit dropped 18.4 per cent to $278m, after a one-off profit in early 2015. Union National Banks net profits were down 27 per cent to $122m due to an increase in provisioning.
Dubai Islamic Bank continued its rapid growth, with profits up 18 per cent to $273m after fees and commission income rose by 37 per cent.
Bank Muscats net profits increased just 1.1 per cent in the first quarter of the year, to $113m.
Kuwait Finance House saw an uptick in its net profits by 14 per cent to $113m on lower provisioning and costs, despite a decrease in its Islamic finance portfolio.
Commercial Bank of Qatar saw its net profits fall 36.3 per cent on higher provisioning, posting $79m.
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