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UAE banks record highest return on equity in the GCC

Aggregate gross loans in GCC highest in 13 quarters

UAE-listed banks once again topped the GCC with the highest return on equity(RoE) at the end of the third quarter of 2024 at 16.8 per cent, recent data showed.

According to Kamco Invest’s latest report on the GCC banking sector, listed banks in the GCC witnessed a broad-based growth in lending during the third quarter of 2024 with healthy quarter-on-quarter growth seen across countries in the region. The growth reflected resilient economic growth in the region that came despite relatively lower oil prices.

Growth was primarily driven by non-oil growth in the UAE, Qatar, Bahrain and Saudi Arabia. “In addition, the project market and the pipeline of prospective projects remain strong for the GCC countries, reflecting commitment to long term growth visions as the countries strive to steer the economy away from the reliance on crude oil,” Junaid Ansari, Kamco Invest’s head of investment strategy and research, said.

Aggregate gross loans for GCC-listed banks increased by 3.1 per cent to reach a new record high of $2.12 trillion at the end of the third quarter of 2024 as compared to $2.06 trillion at the end of the previous quarter. The year-on-year growth reached double-digits at 10.1 per cent, once again led by healthy growth in each market.

On RoE, the UAE was followed by Saudi Arabian and Qatari banks with RoEs of 12.8 per cent each, flat as compared to the previous quarter. The biggest year-on-year growth in RoE was also seen for Oman-listed banks at 80 bps which was mainly led by elevated profits as well as a relatively smaller growth in total shareholders’ equity.

Gross credit for the UAE banking sector increased by 0.1 per cent during July 2024 to reach Dh2.1 trillion. The increase was mainly led by a 0.3 per cent growth in domestic credit that more than offset the decline in foreign credit by 1.5 per cent. Within domestic credit, the month saw 1.2 per cent growth in credit to the government sector and 0.7 per cent increase in credit to the private sector that more than offset a 1.9 per cent decline in credit to government-related entities (GREs) and 1.2 per cent decline in credit to non-banking financial companies (NBFCs).

Banks in UAE also reported a healthy growth in customer deposits during the quarter that reached $828.0 billion, the highest in the GCC, registering a growth of 3.1 per cent as compared to Q2 2024.

Global interest rate expectations underwent a significant change over the last few weeks after economic data releases pointed to stubborn economic trends that were also reflected in higher-than-expected inflation numbers. The resilient economic growth came despite elevated interest rate levels, especially in the US.

Data from GCC central banks once again highlighted the resilience of regional economies with continued growth in outstanding credit facilities. Credit facilities in the region continued to show growth during the third quarter of 2024 led by growth in almost all countries in the region. Saudi Arabia witnessed a double-digit year-on-year growth in outstanding credit facilities at 12.2 per cent while banks in Qatar showed a year-on-year growth of 7.4 per cent. The lending growth in the region reflected a strong project pipeline with aggregate contract awards of $54.2 billion in the GCC during the third quarter of 2024.

Similarly, manufacturing activity data from Bloomberg (Markit Whole Economy Surveys) showed PMI figures stayed strong during the quarter above the growth mark of 50 for Dubai, Saudi Arabia, Qatar and the UAE at the end of the third quarter of 2024. The manufacturing activity in Saudi Arabia remained robust with PMI at 56.3 points during September-2024, the highest in three months. The UAE also boasted a strong PMI figure of 53.8 points in September-2024 while Dubai showed a similar growth with a PMI of 54.1 points.

Aggregate lending by listed banks in the GCC continued to show quarter-on-quarter growth during the third quarter of 2024, backed by growth in all GCC markets. Aggregate gross loans reached a new record high of $2.12 trillion after registering the strongest quarter-on-quarter growth in 13 quarters at 3.1 per cent while the year-on-year growth came in at 10.1 per cent. Banks in Saudi Arabia reported the biggest quarter-on-quarter gross loan growth in nine quarters during the third quarter of 2024 mainly led by healthy lending in almost all sectors. Gross loans growth for Saudi-listed banks came in next at 3.7 per cent to reach $737.4 billion during the third quarter of 2024.

Omani and UAE-listed banks were next with lending growth of 3.6 per cent and 3.4 per cent, respectively.