The UAE continues to boast the biggest share of total listed bank assets in the GCC at $682 billion or 31.3 per cent of the total GCC banking assets, a leading investment bank said.
The growth in assets in the UAE was led by 5.1 per cent growth in assets of Emirates NBD followed by 4.4 per cent growth in assets of ADCB that was partially offset by FAB’s 1.4 per cent quarter on quarter drop in total assets, according to a report by the investment firm Kamco, a subsidiary of United Gulf Bank.
The balance sheet of the GCC banking sector strengthened further in the first quarter as total assets continued to remain at one of the highest recorded levels, witnessing a quarter on quarter growth of 1.3 per cent to reach $ 2.2 trillion.
The quarter-on-quarter growth in net loans stood at 1.9 per cent, the highest since the second quarter of 2017, outpacing the growth in customer deposits recorded at 0.6 per cent, the lowest sequential growth in customer deposits in nine quarters, the report said
The GCC Banking Sector Report: Q1 – 19 said the growth in net loans resulted in a higher loan-to-deposit ratio of 81.6 per cent, albeit below international standards and implying a further improvement in the near term. “In terms of profitability, net interest income remained flat at $14.2 billion while non-interest income saw a big boost in Saudi Arabia and the UAE in first quarter, the report said. “As a result, net interest margin (NIM) remained elevated at 3.2 per cent with Saudi Arabia reporting the highest NIM of 3.6 per cent, showing further marginal improvement over the previous quarter.
On the other hand, NIM for the UAE banks stood at 3.2 per cent, showing a marginal but consistent decline over the past three quarters,” Kamco report said. “On similar lines, yield-on-credit for the aggregate GCC listed banks stood at 4.6 per cent, flat quarter on quarter. Saudi Arabia reported the highest yield of 4.9 per cent during LTM Q1-19.
The top 10 banks in the GCC grew their assets by 1.7 per cent during the quarter accounting for 53.3 per cent of the total GCC banking sector assets.
Saudi Arabia followed the UAE with total assets at $607 billion or 27.8 per cent at the end of Q1-19, although the quarter on quarter growth in the UAE and Saudi Arabia were marginal at 1.3 per cent and 0.4 per cent, respectively,” Kamco said.
Qatar recorded the biggest asset growth during the quarter at 2.4 per cent to reach Dh418 billion. Earnings for the GCC banking sector was once again the key driver of profitability for the overall GCC corporates accounting for 58 per cent of the total GCC listed corporate earnings, said the report.
Saudi Arabia, the UAE, Qatar and Bahrain recorded double digit quarter on quarter growth during the first quarter while in terms of year on year performance, Saudi Arabia witnessed the biggest increase of 12.7 per cent.
Economic growth in the GCC is expected to marginally improve in the near term. Kamco Research believes that this should drive banking sector earnings especially from higher credit requirements from the private sector for both long-term projects as in the case of Saudi Arabia and Kuwait as well as event-specific requirements in the case of Expo 2020 in the UAE and the football world cup in Qatar in 2022.