A research report said on Wednesday that up to 20% of banks in the Middle East and North Africa may need fresh capital to safely meet requirements under the global Basel III banking rules.
The report, released by Arqaam Capital, said of the 54 banks covered by the firm, seven were considered to be undercapitalised, including Emirates NBD and Ahli United Bank – the largest lenders in Dubai and Bahrain.
Another five banks, including Kuwait’s biggest Islamic bank, Kuwait Finance House, and Commercial Bank of Qatar, the state’s second-largest conventional bank, risked requiring more capital due to paying out high dividends.
“We are not rushing banks to improve their capital structure as some banks do generate enough retained earnings compared to their capital consumption and we think banks should adjust their dividends to prepare for the new higher capital requirements,” the report said.
“We see capital weakness or strength as a hidden value that is often neglected in stock analysis in this region.”
Arqaam said its calculations were based on a minimum core equity tier one ratio of 12% – effectively, the 9.5% considered by Basel to be necessary for systematically-important banks with an additional 2.5% premium for MENA banks due to their higher risks than global lenders.