Higher revenues and lower provisions helped the Gulf Co-operation Council (GCC) lenders report double-digit growth in profitability year-on-year (YoY) in the second quarter of this year, according to Global Investment House.
Among Qatar-based banks, Islamic banks outpaced the conventional banks. Qatar Islamic Bank reported a 15% YoY bottom-line growth in Q2, 2014 mainly due to improvement in top-line as well as fee income, Global said in a latest report.
Top-line growth was backed by strong financing growth. Masraf Al Rayan reported 12.1% YoY growth in its bottom-line due to strong growth in net financing income. However, Commercial Bank of Qatar disappointed with a 5.5% YoY decline in bottom-line due to huge accumulation of opex and provision.
Net earnings of GCC banks increased 11.1% YoY to $5.3bn in Q2, 2014, mostly due to higher net interest income, non-interest income and a 7.7% YoY drop in provisions; though a 4.6% YoY increase in operating costs (opex) partially dampened the profit growth, Global said.
Net profit of banks in Kuwait and the UAE increased 20.7% YoY and 20.1% YoY respectively, while net profit of Saudi Arabia and Qatar-based banks increased decently by 7.4% YoY and 3.5% YoY respectively.
Loan book growth among GCC banks continues to be stable; it increased 8.4% YoY to $698.5bn in Q2, 2014. Banks in Qatar registered the highest growth of 15.4%YoY, followed by those in Saudi Arabia (9% YoY), the UAE (4.8% YoY) and Kuwait (4.6% YoY).
Due to stable growth in loan book, net interest income (NII) of GCC banks rose 4.3% YoY. The NII growth was led by UAE-based banks (8.2% YoY), followed by those in Saudi Arabia (7.3% YoY), Qatar (2.9% YoY). The NII of Kuwait declined 6.8% YoY. Combined net interest margin plunged by 17bps YoY.
Non-interest income of GCC banks grew 8.6% YoY during the quarter due to strong growth in fee income. Non-interest income of UAE lenders rose 19.2% YoY during the quarter, followed by Saudi Arabia at 16.7% YoY. Fee income increased 12.6% YoY, with banks in Saudi Arabia leading (16.6% YoY), followed by those in the UAE (14.4% YoY).
The asset base of GCC banks expanded 9.5% YoY to $1.11tn in Q2, 2014 with all the countries witnessing a stable YoY growth. Increase in loan book supported the overall asset growth.
Qatar-based banks witnessed the strongest growth in total assets (13.9% YoY), followed by banks in Kuwait (8.9% YoY), Saudi Arabia (8.7% YoY) and the UAE (7.7% YoY). Expansion in asset base was supported by growth in loan book.
Highlighting that opex shows an uptrend on YoY basis; Global said during the quarter, the overall operating expenses of the combined coverage grew 4.6% YoY to $3.3bn, primarily driven by the UAE (10.8% YoY), followed by Saudi Arabia (8.3% YoY) and Qatar (5.8% YoY).
After a significant rise in the last quarter, opex of the Kuwait based banks declined 8% YoY in 2Q14, which helped to improve bottom-line. Source: Gulf Times