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Arab Banks’ Assets Rise to $2.26 Trillion in 2009

DUBAI — The total assets of 420 banks in the Arab world grew 3.57 per cent to $2.26 trillion in 2009 in spite of the unprecedented global financial turbulence, the head of the Union of Arab Banks said on Tuesday.

The deposit base of Arab banks surged 17 per cent to $1.27 trillion, loan portfolio grew six per cent to $1.09 trillion while the capital base rose 19.5 per cent to $239 billion in 2009, said Adnan Yousef, Chairman of Union of Arab Banks.

The total assets of the top 100 Arab banks in terms of assets has surpassed $1.5 trillion, deposits reached $1 trillion, total loans amounted $831 billion, shareholders equities reached $164 billion and net profits reached $24 billion, Yousef said while addressing the Emirates Bankers’ Forum.

The Arab banking sector currently comprises 280 commercial banks, 60 Islamic banks and 80 investment and specialised banks.

On the global front, banking institutions from the Arab region bolstered their presence further with 89 banks making into the list of the largest 1000 global banks in terms of assets, Yousef pointed out.

The United Arab Emirates led the list with 17 banks, followed by Saudi Arabia and Bahrain each with 11 banks, finding a place in the world leading banks.

Emirates NBD was the number one Arab bank with assets size reaching $76.72 billion, followed by Al Ahli Commercial Bank ($68.65 billion), the National Bank of Abu Dhabi ($53.64 billion), the Arab Bank ($50.6 billion), Samba Financial Group ($49.6 billion), National Bank of Qatar ($49.26 billion), Riyadh Bank ($47 billion), Al Rajhi Bank ($45.6 billion), National Bank of Kuwait ($44.97 billion), and Commercial Bank of Abu Dhabi ($43.62 billion).

The total assets of these banks reached about $530 billion, and their equity $68 billion, the chief of Arab banks said.

However, Al Rajhi Bank led Arab banks in net profit for 2009 $1.8 billion.

He said Arab Islamic banks also recorded “considerable growth in 2009 while demonstrating their capacity to avoid the effects of the global financial crisis. Data of the 10 largest Arab Islamic banks show that they manage assets of $237 billion, a deposit base of $174 billion, and a capital base of $29 billion.

Al Ahli Commercial Bank ($68.65 billion) leads Arab Islamic banks in assets, followed by Al Rajhi Bank ($45.6 billion), Kuwait Finance House ($39.07 billion), Islamic Bank of Dubai ($22.97 billion), and Islamic Bank of Abu Dhabi ($17.46 billion).

Yousef said despite the positive global signals, the situation of the financial sector “is still far from what it was before the crisis,” while financial stability is still facing serious challenges.

“New risks have emerged as a result of the outstanding and massive support given by governments to their financial sectors. The cost of this unprecedented support was a clear increase in sovereign risk and a consequent increase in the burden of sovereign debt,” Yousef pointed out.

He argued that the increase in sovereign debt “in turn increases the risks that may play a role in threatening the financial stability in the future.”

He maintained that the process of absorption of credit losses was still ongoing, with the support of increase in capital.

“But despite the increase in the capital of many banks, significant additional capital may be required to support the recovery of credit activity and to maintain economic growth under the new Basel expected standards for capital adequacy.”

The profitability of global banks will be restricted in future if weakness in credit growth continues along with funding pressures and increase in capital, he said.

“This stresses the need to take firmer steps such as encouraging the restructuring of banks while ensuring sufficient margins to overcome the future shocks and generate additional amounts of capital reserves.”

· issacjohn@khaleejtimes.com