GCC banks hit by slowing growth

20 July 2016

Many banks struggle in weaker operating environment, while a few excel

Many GCC banks have seen profit growth slow or reverse as their operating environment due to low oil prices and slowing economic growth, 2016 first half results reveal.

The largest bank in Saudi Arabia, National Commercial Bank, saw its net profits reach $1.35bn in the first half, just a 2 per cent increase year on year. Its loan growth stayed high at 13 per cent year on year, but deposits fell 12.8 per cent.

Smaller Saudi banks saw profits fall, such as Samba Financial Group, whose net profit decreased 1.4 per cent year on year to $686m as its loan portfolio stopped growing.

However, some banks were able to buck the trend, with Al Rajhi Bank posting a 17.6 per cent increase in profits, recovering from a difficult few years, to $1.09bn.

The UAE showed a similar profile. Emirates NBD increased its H1 profits by 12 per cent to $1.01bn, thanks to reduced provisioning for impaired loans. Its loanbook grew 12 per cent year on year, while deposits increased by 8 per cent.

Meanwhile Abu Dhabi Commercial Bank saw a 15 per cent fall in net profits to $585m despite loan and deposit growth of 13 per cent year on year. Union National Bank and Commercial Bank of Dubai also posted significant falls in net profits on increased provisioning.

In Qatar, rapid loan growth continued despite the stagnation of deposits. Qatar National Bank increased its loan portfolio by 39 per cent thanks to an acquisition, while Qatar Islamic Bank (QIB) recorded a 25 per cent increase in financing. This drove an 18 per cent increase in profits at QIB to $290m.

Despite the very high and increasing loan to deposit ratios at Qatar banks, Moody’s Investors Service is not concerned as the ratio does not cover other sources of funding. Although Qatar’s banks will be more reliant on market funding, capital buffers remain strong. Profitability should continue to be good despite a slight deterioration in asset quality.

Kuwait’s flagship lender, the National Bank of Kuwait, reported a 7.8 fall in net profits to $498m. Other Kuwaiti banks fared better, with Boubyan Bank reporting an 18 per cent rise in first half net profits to $62m.

Oman’s largest lender, Bank Muscat, saw net profit growth fall to 0.7 per cent year on year, reporting $235m so far in 2016. This is despite 10.8 per cent loan growth. Smaller Omani banks had mixed results. National Bank of Oman’s net profits rose 5 per cent to $76m. Bank Sohar reported a 36.5 per cent fall in net profits to $23m due to a weaker operating environment and impairments, whle its merger partner Bank Dhofar increased its profits by 15.7 per cent to $68m.

A number of banks are yet to issue results.

Selected GCC bank results H1 2016          
BankCountryNet profit ($m)Change yoy (%)Operating Income ($m)Change yoy (%)Total assets ($bn)Change yoy (%)Total loans or financing ($bn)Loan growth yoy (%)Total deposits ($bn)Deposit growth yoy (%)LDR (%)NPLs (%)
Qatar National Bank Qatar 170012  136.536136.539134.129101.7%1.8
NCBSaudi Arabia1351224866.8120.7-1.970.61383.9-12.884.1% 
Emirates NBDUAE10121220892115.91077.91281896.1%6.6
Al Rajhi BankSaudi Arabia108517.620259.288.41.359.96.672.30.682.8% 
National Bank of KuwaitKuwait498-7.81197-2.979.74.9      
Abu Dhabi Commercial BankUAE585-151159165.61342.21340.613103.9%2.7
SambaSaudi Arabia686-1.41038-0.762.43.634.9-0.145.90.776.0% 
Riyad BankSaudi Arabia6190.91070-4.860.82.441.312.843.7-1.894.3% 
Saudi British BankSaudi Arabia6111.89494.951.2-0.2353.340.1-0.687.2% 
Qatar Islamic BankQatar29018730 37.11526.72526.1 102.1%1
Commercial Bank of QatarQatar132 503-11.734.9721.36.619.812.4107.5%4.8
Bank MuscatOman2350.75485.3  19.810.819.92.999.4% 
Abu Dhabi Islamic Bank UAE270 810 33.1   26.5   
Union National BankUAE251-22457-1227.8-219.1420095.6%3.6
Masref al-RayanQatar2895.3  24.38.37.311.9   0.1
Commercial Bank of DubaiUAE132-20.3325116.718.911.16.911.315.998.2% 
Emirates IslamicUAE37 3351115.6810.614.511.46.293.7%8.5
Boubyan BankKuwait62181691711.218      
Bank of Bahrain & KuwaitBahrain836.517811.59.9 4.6 7 65.7% 
Bank DhofarOman6815.717522.69.912.17.413.57.14.6103.5% 
National Bank of OmanOman76517759.297.3156.3-1-114.5% 
Bank SoharOman23-36.589-5.96.16.44.753.94.8122.3% 
Kuwait International BankKuwait4015104-25.95.9      
Source: Published bank results            

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