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
2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | News Archive
Most Viewed Companies
Ticker Price Volume
SAGRINSURANCE 31.05 659,658
SABIC 108.36 5,851,108
ALMARAI 90.47 503,362
EEC 37.23 10,664,083
EMAAR 7.8 20,250,600
SPIMACO 47.16 1,116,628
RIBL 17.89 2,196,030
Recent News

Saudi bank credits surge 10% to SR1.28 trillion
Bank credits in the Kingdom registered a growth rate of 10.3 percent year-on-year basis to hit SR1.28 trillion in March 2015 compared to SR1.16 trillion in the same period last year, according to a f

Digicel's Myanmar deal adds to Islamic finance landscape
Cellular operator Digicel Group Ltd has obtained $60 million in sharia-compliant financing for its Myanmar venture, helping widen the reach of Islamic finance transactions as the sector continues to

Jet fuel prices slashes at Saudi airports
Saudi Arabia has instructed Saudi Aramco to cut jet fuel prices for airlines using airports in the Kingdom, according to a Cabinet announcement.

Accordingly, jet fuel prices will be cut by 1

Dollar, yen slightly stronger against euro
The dollar and yen were slightly stronger against the euro in foreign exchange trade yesterday, with Tokyo and London action muted for a holiday.

The euro edged down after last week’s rall

Euro near session lows vs. dollar after U.S. factory data
The dollar remained remained close to session highs against the euro on Monday after data showed that U.S. factory orders rose at the fastest pace in eight months in March, adding to indications that

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?