GCC banks face headwinds in third quarter

29 October 2015

Results diverge on ability to sustain growth in more difficult conditions

GCC banks have seen mixed results in the third quarter of 2015, as lower oil prices and tightening liquidity begin to slow growth.

The results diverged depending on each bank’s ability to sustain growth in their major markets.

The region’s largest bank, Qatar National Bank, saw profits grow 9.5 per cent over the first nine months to $2.4bn, as its loans and advances rose 11.5 per cent.

But Saudi Arabia’s National Commercial Bank saw much slower profit growth in the first nine months of 2015. Its profits were up 2 per cent to $1.9bn, while loan and advances grew 11.1 per cent.

Other Saudi banks began to show the more difficult conditions, such as Al-Rajhi Bank, which posted a 2.5 per cent fall in profits over the nine months to $1.4bn as loan growth slowed to 3 per cent. Meanwhile Samba Financial Group managed a 5.4 per cent profit growth to $1.1bn, as its loanbook grew 5.8 per cent.

The National Bank of Abu Dhabi also performed less well, with profits falling 0.3 per cent to $1.1bn over the period. Although customer loans grew 7.1 per cent year on year, the third quarter saw them fall by 2.7 per cent.

The hardest hit segment was global wealth, with revenues down 9.4 per cent year-on-year due to “more challenging market and liquidity conditions” and falling government deposits.

This dragged quarterly profits down 3 per cent compared to the third quarter of 2014.

First Gulf Bank, also based in Abu Dhabi, saw its nine-month profits grow only 4 per cent to $1.2bn. Net interest income fell 1 per cent despite 16 per cent year-on-year growth in its loans and advances.

In Dubai, Emirates NBD bucked the trend, posting a 27 per cent increase in net profit in the first nine months, compared to the same period in 2014. The jump to profits of $1.4bn was driven by increases in interest income and declining provisioning requirements as non-performing loan levels dropped slightly to 7.1 per cent. Gross loans were up 7 per cent between the end of 2014 and September 2015.

National Bank of Kuwait saw its profits for the first nine months of 2015 rise 12.3 per cent to $788m. Gross loans and financing rising 11.1 per cent to $43.8bn, as growth speeds up on renewed government spending in Kuwait.

Oman’s largest bank, Bank Muscat, posted a 7.5 per cent rise in profits over the first three quarters, as they reached $451m. Net loans, advances and receivables continued growing at 9.7 per cent over the period, while the bank achieved 12.1 deposit growth despite government withdrawals.

Smaller banks have struggled too. Sharjah’s United Arab Bank, which saw its loanbook contract by 2 per cent over the nine months, reported an 85 per cent drop in profits compared to the same period in 2014 to just $20m. In Oman, Bank Sohar and HSBC Bank Oman saw their net profits fall 10 and 15 per cent respectively.

Other medium-size banks saw good performances in the first half followed by a difficult third quarter. Dubai’s Mashreq Bank saw its quarter three profits drop 7.6 per cent year-on-year, while Qatar’s Masref al-Rayyan recorded a 2.2 per cent fall in the third quarter net profits.

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