ARAB Banking Corporation (ABC) remains the leading Gulf bank in terms of assets and its loan portfolio, though its return on assets is one of the lowest in the region. Saudi banks continue to be some of the biggest lenders, though the most striking feature of the 1995 bank results was the growing profitability of Islamic institutions.

Two banks in particular – Saudi Arabia’s AI-Rajhi Banking & Investment Corporation and Kuwait Finance House – have both turned in strong performances in terms of profit growth Each is the only Islamic commercial bank in its domestic market, and there are no signs of new competitors emerging to challenge them on their home ground in 1996.

Among the conventional banks, most Gulf institutions performed well in 1995. The two banks that made losses in 1994, one Saudi and one Kuwaiti, are both back in the black. Banks in Kuwait and the UAE also turned in impressive performances in terms of asset growth and rising piofits, though there is concern about the quality of the retail loan portfolios of some Saudi banks, despite a string of good results from the kingdom.

-Assets. Arab Banking Corporation (ABC) retains its place as the Arab bank with the largest balance sheet: it has $21,265 million in assets, around 9 per cent higher than the year before. Saudi institutions account for more than half of the top 10. Al-Bank Al-Saudi AlFransi makes it back onto the list this year, nudging aside National Bank of Abu Dhabi.

NBAD’s assets tends to fluctuate from year to year with the financial needs of the Abu Dhabi government, to which it acts as banker.

-Loans and advances. ABC remains the biggest lender among Gulf banks. Saudi American Bank (Samba) moved up the ranks of the top 10 lenders, increasing loans by around 2 per cent in 1995 to $4,641 million. This is a much smaller increase than the 29 per cent rise in 1994. UAE banks also increased their lending portfolios in 1995, in line with the thriving local economy. Emirates Bank International, one of the largest Dubai banks, posted one of the largest increases in lending in the UAE – up 54 per cent to $2,610 million.

-Customer Deposits. National Commercial Bank of Saudi Arabia has the largest deposit base of any Gulf bank, with $14,932 million in deposits, up around 6 per cent from 1994.

Outside the top 10, one of the most spectacular increases in deposits was reported by the UAE-based Arab Bank for Investment and Foreign Trade (Arbift), which recorded a rise of more than 80 per cent to $570 million.

-Net profit. Two Islamic banks made a strong showing. AI-Rajhi Banking and Investment Corporation is currently the most profitable bank in the Gulf with 1995 net profits of $298 million, despite being only the ninth largest in terms of assets. Kuwait Finance House (KFH) has moved up into 10th place. KFH has the advantage of being the only Islamic commercial bank in the thriving Kuwaiti market, although Islamic banking in the region is becoming more competitive as conventional and other Islamic banks build up their capabilities.

Of the two banks which reported a loss in 1994, Commercial Bank of Kuwait bounced back into profit while the Saudi-based Bank Al-Jazira just made it into the black in 1995 after recovering from severe problems with non-performing loans.

-Return on equity (ROE) Kuwait Finance House provided the best return on equity of the Gulf banks at 33.71 per cent, some way ahead of Samba in second place at 26.29 per cent. Some Omani banks, which are relatively undercapitalised, provide some of the highest returns to shareholders. The bank with the worst ROE remains Bank Al-Jazira at 0.1 per cent.

-Return on assets (ROA). The International Investor, a boutique Islamic investment bank based in Kuwait, retains its place at the head of the list though its RCA fell to 8.70 per cent in 1995 from 10.29 per cent the year before.

Some of the best performers are small the UAE’s National Bank of Umm al-Qaiwain at 4.25 per cent and United Gulf Bank in Bahrain at 4.18 per cent. Commercial Bank of Dubai, an up and coming UAF bank, improved its RCA markedly to 3.66 per cent from 2.95 per cent in 1994 – the sixth best of the Gulf banks.

Islamic banks provide some of the best ROAs in the region Faysal Islamic Bank of Bahrain was higher than in 1994 at 4.35 per cent, and Al-Rajhi also improved at 3.64 per cent By comparison, the regional average is 1.94 per cent. Some of the largest banks in asset terms are among the poorest performers – NBAD had an RCA of 0. 92 per cent, National Commercial Bank of 0.91 per cent and ABC of 0.55 per cent.

-Equity-assets ratio. Some of the most heavily capitalised institutions are offshore banks, with United Gulf Bank, Gulf Riyad Bank, Bahrain International Bank and TAIB Bank all in the top 10. Saudi Investment Bank has the lowest ratio at 6.25 per cent, with most banks having equity equivalent to between 10 and 20 per cent of their assets.

-Loans-assets ratio. Gulf Riyad Bank has almost all of its assets in the form of loans.

The bank, which has been winding down its business for several years, is expected to be liquidated before the end of the year by Joint owners Riyad Bank and Credit Lyonnais.

Omani banks have a high proportion of their assets in the form of loans, while Kuwaiti banks with their government bond portfolios are among the lowest.

Diarmid O’Sullivan