Qatar’s banks saw a 20% expansion in operating income in 2013 against 11% in the Gulf region’s banking industry, while in operating profits, it was 7% compared to 10%, according to the Boston Consulting Group (BCG), a global management consulting firm.
However, Qatar’s banks reported much higher delinquencies as loan loss provisions (LLP) grew 45% against only 3% in the Gulf Co-operation Council (GCC) banking sector, BCG said in a latest report. “While revenues of banks in Qatar grew by 20% and banks in the UAE are back to double digit growth overall (12%), Saudi, Omani and Bahraini banks are experiencing single digit growth (6%, 5% and 7% respectively),” it said.
Finding that the spread of profit growth rates was particularly wide, it said while banks in Bahrain enjoyed 30% profit increase and 19% in the UAE, banks in Kuwait had to cope with double digit reductions (12%).
In 2013, the overall growth of revenues of the GCC banks exceeded the growth in the segments by about 4%, which is “significant”, it said. “This is largely due to several significant acquisitions of foreign banks, which are consolidated in the international divisions,” it added.
In addition, treasury revenues grew by 16%. “While we are observing only a growth around 7% in the core segments, we acknowledge that this growth is almost twice as high as in 2012, especially in corporate banking,” according to Dr Reinhold Leichtfuss, senior partner and managing director at BCG’s Dubai office and leader of BCG’s financial institutions practice in the Middle East.
The 2013 BCG index includes 35 banks from across the GCC, capturing nearly 80% of the total regional banking sector.
In 2013, retail banking revenues in the GCC saw a further uptick of 7.2%, largely due to an increase in the UAE. Qatar and Kuwait had retail banking revenues in the high single digits, close to 10%, followed by the Saudi banks with a healthy 5.9%. Bahrain reported no revenue growth, while in Oman, it was on the decline.
GCC retail profits, which had been declining for several years, saw an uptick of 5.8% compared to 3.5% last year. Nevertheless, the profit level in 2013 remained slightly below 2006 levels which were exceptional retail years for banks in the GCC.
The corporate segment reached a new top index level in revenues in 2013 by growing 6.9%. In 2013, banks in Saudi Arabia and Bahrain especially “excelled” in corporate banking revenues. On average, profits of the GCC banks increased by 11%, due in particular to strong increases in revenue of banks in Saudi Arabia.
“If we take out the effect of ‘country specific growth’ which is often driven by government investments, of which banks benefit from at varying degrees, both long and short-term developments show that the banks that have a superior strategy and were able to build strong business models and execute decisively, grow the strongest,” Leichtfuss said.
In 2013, LLP varied significantly by country, BCG said, adding in particular, banks in Qatar and Kuwait had to build higher provisions due to increasing delinquencies.
The UAE and Saudi lenders largely repeated the provision levels of 2012 of $3.3bn and $1.7bn respectively, the report observed. Source: Gulf Times