Friday 31 / January / 2025
Muscat: GCC banking sector continued to record improving results during the first quarter (Q1) of 2022 backed by solid economic recovery and demand post the pandemic, according to a new report.
“The gain in oil prices since the start of the year also supported the growth and business confidence as governments across the region stepped up economic investment plans backed by the additional oil earnings,' Kamco Invest, the Kuwait-based investment strategy & research firm, said in its GCC Banking Sector Report - Q1-2022.
Moreover, the loose fiscal policies in the region and globally that were implemented last year with an aim to boost investments also supported investment in businesses, the report added.
Aggregate net profits for the sector soared to $10.9 billion in Q1-2022, one of the highest quarterly levels on record, backed by higher profits across the Gulf Cooperation Council (GCC).
Banks in five of six countries reported double-digit aggregate growth in profits while Kuwait’s growth was only slightly lower at 9.0 per cent. The year-on-year performance also showed healthy growth in profits across the markets.
The bottom line was supported by marginal growth in net interest income and flattish non-interest income. Also supporting was a quarter-on-quarter drop in a cost-to-income ratio that came at 39.6 per cent led by a steep quarter-on-quarter (q-o-q) drop in operating expenses.
Shareholders’ equity on the other hand showed a much smaller q-o-q growth of 0.4 per cent during Q1-2022 to reach $355.2 billion. This resulted in a return on equity of 10.8 per cent in Q1-2022, one of the highest on record for the sector in the GCC.
The increase in profit was also supported by a steep q-o-q decline in loan loss provisions booked by banks in the region. Total provisions dropped by a quarter to $2.9 billion during Q1-2022 as compared to $3.8 billion in Q4-2021, whereas the y-o-y decline came in at 21.4 per cent.
All countries in the GCC reported a double-digit q-o-q drop in provisions during Q1-2022 barring Kuwaiti banks that reported a marginal increase of 0.6 per cent.
Lending activity remained robust during Q1-2022 resulting in record-high loan books at the end of the quarter. Aggregate gross loans reached $1.8 trillion, up 2.1 per cent q-o-q and 10.1 per cent y-o-y, mainly led by strong growth in Saudi Arabia and UAE that was partially offset by a decline in gross loans mainly by Omani and Bahraini listed banks.
Net loans showed a slightly higher growth of 2.5 per cent q-o-q to reach $1.68 trillion, backed by growth in all markets, barring Bahraini banks that reported a decline of 2.1 per cent. Customer deposits also showed growth, albeit slightly smaller at 1.7 per cent q-o-q and 9.9 y-o-y during Q1-2022 to reach $2.1 trillion.
The sequential growth was led by strong growth in Saudi Arabia and Qatar partially offset by a decline in Bahrain. The net impact on the loan-to-deposit ratio was a q-o-q gain of 60 bps to regain the 80 per cent mark with the ratio at 80.5 per cent.
LLP declines
Loan loss provisions (LLP) once again witnessed a steep double-digit drop across the GCC in Q1-2022, barring Kuwait which showed a marginal increase as compared to Q4-2021, the report said.
Total LLP reached $2.9 billion during the quarter, a $0.9 billion decline as compared to $3.8 billion in Q4-2021. The decline came after the bulk of the banks in the region reported smaller provisions during the quarter.
Qatari banks reported the biggest absolute decline in provisions with a drop of $0.4 billion to reach a total LLP of $0.9 billion followed by UAE and Saudi Arabian banks with declines of $0.3 billion and $0.2 billion, respectively.
That said, Qatari banks overtook UAE banks in terms of the size of quarterly provisions which stood at $0.88 billion in Q1-2022 closely followed by $0.85 billion and $0.58 billion for UAE-listed banks and Saudi Arabian banks, respectively.
