GCC banks see 8.7% rise in Q1 loans to $809 billion

Loans growth of UAE banks was at seven per cent during the first quarter of 2016.

The collective loans disbursed by GCC banks increased by 8.7 per cent year on year to $809 billion in the first quarter of 2016 as their total assets expanded 5.6 per cent to $1.3 trillion in the same period, Global Investment House said.

The Kuwait-based investment company said Qatar-based banks witnessed the strongest growth in total assets (11.8 per cent), followed by banks in the UAE (6.8 per cent), Saudi Arabia (2.2 per cent) while Kuwaiti banks saw a flat growth of 0.7 per cent.

"Expansion in asset base was supported by growth in loan book. However, on a quarter-on-quarter basis, asset growth was sluggish due to marginal increase in loans. Among the individual banks, Qatar Islamic Bank [33.1 per cent], Doha Bank [14.2 per cent] and Emirates NBD [12.8 per cent] recorded strong asset growth year on year in the first quarter," Global said in its GCC Banking Sector Quarterly report.

While collective loans disbursed by GCC banks under Global Investment House's coverage increased, margins of these banks remained under pressure on year-on-year basis due to 28bps (basis points) rise in cost of funds while yield improved by 14bps, leading to 13bps shrinkage in net interest margin NIM on a year-on-year basis.

Qatar-based banks managed to maintain highest lending growth (16 per cent) due to an increase in public sector spending backed by several developmental initiatives taken by the government prior to FIFA World Cup 2020.

Loans growth of UAE banks was at seven per cent during the quarter. "Despite Expo 2020 on the cards, lending growth of the country was mild due to weak oil prices during the quarter. Among the UAE banks, Emirates NBD [12.1 per cent] achieved highest lending growth, followed by Abu Dhabi Commercial Bank [11 per cent] and First Gulf Bank [6.8 per cent]," the report said.

During the quarter, net earnings of GCC banks dropped 0.7 per cent to $5.6 billion. Net profit of banks in Kuwait declined the most (-10.1 per cent), followed by the UAE (-7.7 per cent). However, net profit of Saudi and Qatar banks improved 6.6 per cent and 1.7 per cent, respectively.

Global report said non-interest income of banks under its coverage fell 6.1 per cent during the quarter due to 1.3 per cent decline in fee income and what seems like lower investment gains. Qatar (13.7 per cent) recorded a positive change in non-interest income, while Kuwait (-26.1 per cent), Saudi Arabia (-5.9 per cent) and the UAE (-4 per cent) reported decline in non-interest income.

The net interest income (NII) of GCC banks increased 2.6 per cent year on year while it declined 0.8 per cent quarter on quarter. The NII of banks in Saudi Arabia grew the most (5.1 per cent), followed by Qatar (2.9 per cent), Kuwait (2.1 per cent) while the UAE declined 0.5 per cent, the report said.

Among the UAE based banks, Emirates NBD reported 2.8 per cent year-on-year growth in NII during the quarter, followed by National Bank of Abu Dhabi (2.3 per cent).

S&P Global Ratings forecasts a more pronounced slowdown of growth of both conventional and Islamic banks in the GCC. Asset growth started to moderate in 2015, reaching seven per cent for Islamic and 5.7 per cent for conventional banks in 2015, compared with 12.3 per cent and 9.6 per cent respectively in 2014.

- issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com