GCC banks to fare positively in fiscal 2010: Global


15/11/2009 00:00 AST  Oman Daily Observer

The GCC banks experienced a significant profit decline in 3Q09 as compared to the previous year; down 9%YoY for the quarter and down 13%YoY for the 9M09 periods, the Kuwait-based Global Investment House stated here yesterday. Bottom lines of Saudi and UAE banks, however, were less impacted despite the fact that banks from these countries were the major contributors of non-performing loans, and consequently provisions. This came as a positive surprise since asset deterioration, now a pandemic, has led banks to take heavy provisions, unleashing havoc on their earnings.

While earnings in 3Q09 for Kuwait, Qatar and Oman declined 32%YoY, 20%YoY and 26%YoY respectively, UAE and KSA enjoyed a better fate with a decline of 6%YoY and rise of 2.1%YoY, respectively. On a 9M09 basis, banks in all countries declined in profitability with Kuwaiti banks standing out as the worst hit, exhibiting a 45%YoY erosion in profits, while KSA banks maintained to contain the decline to just 2%YoY. Banks in the remaining countries witnessed a decline of 13-15% in profits in the 9M09 period.

Heavy provisioning remained the theme common to all banks in GCC, as deteriorating asset quality went unhindered and turned into the biggest nightmare for the lenders in the GCC. Aggregate provisions taken by the GCC banks increased approximately 3-fold in the 3Q09 on a YoY basis and more than doubled YoY for the 9M09 period. Provisions in 3Q09 which remained relatively unchanged QoQ, eroded 22% of the aggregate total income (net-interest income + non-interest income) of GCC banks. Banks have been severely affected by the Saudi conglomerates, the Sa’ad and Al Gosaibi groups that defaulted on $10bn of loans, as per news reports.

The main cause of heavy provisioning can therefore be associated with the exposure banks have to these Saudi groups. Furthermore banks, particularly those in the UAE have also disclosed that delinquencies from other corporates and even retail (especially credit card loans) have also contributed to increasing provisions. ADCB stands out as the bank worst hit by provisions among the GCC banks under our coverage; its exposure to the Saudi groups, reported at $609m is calculated to be 76% of the total exposure disclosed by UAE banks (under our coverage) and 54% of the total exposure disclosed by GCC banks (under our coverage).

As per our calculations, provisioning (arising from non-performing loans and impairments in investments) accounted for 65% of the bank’s total income in 3Q09. Consequently, UAE banks seem to be the worst hit (by provisions) among their regional peers followed very closely by Kuwaiti banks. On a country-wise basis, while the provisions/total income ratio was calculated at 14-16%, the same for Kuwait stood at 27% for the 3Q09 period. Excessive provisioning in Kuwait was due to KFH and Gulf Bank, where the former seems to be attempting to increase its loan loss coverage while the latter is still recuperating from an equity wipe-off and issues including exposure to the Saudi groups (as per market news).

For more on this:

http://www.omanobserver.com/

Economic and Business News
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | News Archive

JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEP | OCT | NOV
Most Viewed Companies
Ticker Price Volume
EEC 56.07 6,113,502
EMAAR 11.3 23,638,996
SABIC 103.91 5,182,260
RIBL 18.72 1,298,767
EXTRA 104.17 264,978
ACIG 27.11 707,920
ALKHODARI 64.93 2,040,118
Recent News

STC logs on to LinkedIn to enhance hiring & marketing
SAUDI Telecom Company (STC) signed a new agreement with LinkedIn, the world’s largest professional network with more than 313 million members. This agreement enhances an existing relationship between

Mobily cloud services meet agencies, enterprises needs
MOBILY announced that it is providing currently the best cloud environment for more than 35 governmental and private sector agencies in accordance with the highest levels of reliability, security, an

New technologies eyed to meet KSA power needs
The importance of efficient cooling power generation technology was emphasized by senior Saudi utility officials and key industry leaders during the District Cooling and Tri-Generation Summit here on

Jeddah to host Omani Products Exhibition
Preparations for the fourth Omani Products Exhibition (OPEX), scheduled to be held at the Jeddah Center for Forums and Events on May 18-21, 2015, are well underway with more than 100 Omani companies

MENA to spend $300b on water and desalination projects by ’22
Middle East and North African governments are expected to spend an estimated $300 billion on water and desalination projects by 2022, underscoring the importance of January 2015’s International Water

GulfBase GCC Index
Search By
  • Company Symbol
  • Company Name
  • Mutual Fund Name
  • News Content
Send this page to a friend

Poll

Which of the following do you think is the best long-term investment?