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
2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | News Archive
Most Viewed Companies
Ticker Price Volume
QNBK 146 383,603
WAHA 1.72 489,438
DAMAC 2.88 5,023,218
MMG 0
BKIZ 0.08 62,350
SABIC 98.2 2,769,289
BATELCO 0.26 25,000
Recent News

OPEC says it will extend production cuts through March 2018
The Organization of the Petroleum Exporting Countries on Thursday renewed an agreement to withhold some crude-oil supplies into March 2018, people familiar with the matter said, doubling down on its

OPEC meets to extend oil cuts for up to one year
OPEC and non-member oil producers are gearing up to extend output cuts on Thursday, possibly by as long as 12 months, to help clear a global stocks overhang and prop up crude prices.

The O

U.K. Economy Weakens More Than Estimated, Growth Drops to 0.2%
The U.K. economy slowed more sharply than initially estimated in the first quarter as shoppers flagged and trade dragged on growth.

Gross domestic product rose 0.2 percent, less than the 0

OPEC Set to Prolong Cuts as Effort to Clear Oil Glut Goes Slow
OPEC and its allies were poised to extend their production cuts for another nine months after last year’s agreement failed to clear a global supply glut or deliver a sustainable price recovery.

Oman share index falls on regional cues
Oman’s benchmark, MSM30 Index, followed regional cues and ended on a weaker note at 5,392.31 points, down 0.17 per cent. The MSM Sharia Index closed at 789.80 points, up 0.06 per cent. Al Madina Inve

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?