GCC banks to fare positively in fiscal 2010: Global


15/11/2009 00:00 AST

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/

Oman Daily Observer
Economic and Business News
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | News Archive
Most Viewed Companies
Ticker Price Volume
RIBL 11.03 528,496
GFH 0.24
SABIC 81.92 10,783,841
SIPCHEM 14.2 640,122
WAFRAH 27.45 1,590,802
ALMARAI 55.05 114,628
QNBK 138.4 177,998
Recent News

Moody's assigns provisional (P)Ba1 to Ezdan's Sukuk Programme
Moody's Investors Service, ("Moody's") has today assigned a provisional (P)Ba1 senior unsecured MTN rating to the USD2.0 billion Trust Certificate Issuance Programme (the "Programme") of Ezdan Sukuk

Saudi Arabia working on SME stock market rules for early 2017 launch
Saudi Arabia is working to finalise the rules for a new stock market dedicated to small and medium-sized businesses that it expects to launch early in 2017, the chief executive of Tadawul, the kingdo

Taqa denies selling its oil and gas assets
Abu Dhabi National Energy Company (Taqa) said on Wednesday that it is not engaged in discussions with any entity to sell its oil and gas assets. The company did not give any further details in a stat

Abraaj said to seek up to $300m value in Egypt health IPO
Buyout firm Abraaj Group is seeking a valuation of as much as $300 million (Dh1.1 billion) for a group of hospitals it plans to list on the Egyptian stock exchange, according to two people familiar w

Saudi firms cope with austerity but more pain lies ahead
Saudi Arabian companies are faring better in an era of austerity than many investors feared, but they face more pain in the coming months as gains from cost-cutting and efforts to improve efficiency

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

Poll

Looking ahead, what change you are more likely to make in investing in your domestic stock market?