As a result of being home to the region’s biggest stock market, Saudi Arabia’s banking sector was hit worst by the market crash. But it has largely managed to avoid the other banking disaster of 2007 – the collapse of the US sub-prime mortgage market. Bahrain’s more globally integrated banking sector had most exposure to poorly performing loans, and was consequently hit worst by the credit crunch.
It was not all bad news in 2007, however. Qatar was the region’s fastest-growing market, with its three biggest banks producing combined profit growth of 38 per cent, compared with a regional (unweighted) average of 1.8 per cent.
Qatar’s institutions are now looking for new opportunities outside the state and several markets are ripe for consolidation, from Egypt, which is actively encouraging foreign investors, to Lebanon, which has 60 banks for 4 million people.
This year already looks better, with growth in retail and lending services, project finance incomes and strong stock markets expected to boost performance.