27/08/2015 08:20 AST
Bahrain’s corporate earnings growth for the whole of this year is expected to be robust at six per cent, when compared with last year, according to a leading
regional investment bank.
In a report, the Kuwait Financial Centre said while UAE and Qatar are likely to see 8pc and 6.2pc growth respectively during the same period, corporate earnings in other GCC countries are set to decline with earnings in Saudi Arabia falling the most at 7.9pc.
Corporate earnings in Kuwait and Oman are expected to fall moderately by 1.6pc and 0.4pc respectively.
Overall GCC corporate earnings are expected to contract by 0.3pc this year over last year and reach $69.7 billion by the end of the year.
The outlook suggests an improvement as the bank’s assessment for the first half of the year showed GCC corporates posted a 7.2pc decline in earnings over the same period last year.
Total earnings for the first half came in at $34bn.
They were driven by strong performance from banks and real estate.
Aggregate net profits for banks came in at $16.7bn, a rise of 9pc over the first half last year.
Earnings from real estate came in at $3.7bn, recording a growth of 44.5pc year-on-year.
Robust growth in the earnings of banking sector, which accounts for 49pc of earnings, however, could not prevent overall corporate earnings from declining by 7.2pc year-on-year.
The telecom sector continued its negative run from last year, with overall profits declining by 35pc.
Qatar had the highest earnings growth during the period at 13pc, with the rest of the GCC countries recording a decline.
Fall in oil prices, a strengthening US dollar and company specific issues were responsible for the poor earnings in the first half.
Earnings in Kuwait and Saudi Arabia contracted by 19pc and 16pc, respectively, (year-on-year basis), while UAE, Bahrain and Oman also registered negative earnings growth of 2pc, 5pc and 7pc, respectively.
Real estate and banking have been the star performers in the region registering growth of 44.5pc and 9pc, respectively.
Despite signs of slowing down towards the end of last year, the real estate sector had a great run in the first half.
The commodities sector, which is the second largest sector in terms of net earnings, was impacted by lower oil prices.
The telecom sector, the fourth largest in terms of net earnings, was affected by the reduction in ARPUs (Average Revenue per User), as well as company specific losses.
A real estate boom in major markets such as UAE (Dubai and Abu Dhabi), Qatar and introduction of mortgage lending reforms in Saudi Arabia have led to significant earnings growth of the sector.
The telecommunications sector’s earnings were affected by strengthening of the US dollar (Ooredoo), the earnings restatement of Mobily and its continued dispute with Zain Saudi.
Falling average revenue per user across the region was also a reason behind the fall in telecom earnings.
Meanwhile, a survey by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) found that business confidence in the Middle East continued to fall in the second quarter, but not as quickly as it had in the first three months of
the year.
The slight optimism was due to a temporary reprieve in oil prices during the spring, but was a short-lived flame of hope for Opec members, which was quickly extinguished by the prospect of Iran re-entering the market within a year.
More than any other region, firms in the Middle East began looking for opportunities in new markets in the last three months.
Gulf Daily News
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