GCC banks outshine global competitors

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Dubai's landmark Emirates NBD bank seen from Dubai Creek. GCC’s banking industry outpaced global competitors by recording growth in both revenue and profit in 2012.
Dubai’s landmark Emirates NBD bank seen from Dubai Creek (Khor Dubai).
GCC’s banking industry outperformed global competitors by recording growth in both revenue and profit in 2012. Photo-Andrey

Boston Consulting Group (BCG) has revealed the GCC’s banking industry beat their global competitors by recording growth in both revenue and profit last year.

The study is based on the annual results from 32 banks located throughout the region. The survey covers almost 80% of the GCC’s total banking sector. Figures show that revenue and profits of Middle Eastern banks surged in 2012 by 6.9% and 8.1%, respectively. Most of the profits were earned from extraordinary-income sources. Operating costs rose by 7.2% and an increase in provisions for bad loans of 2% were secondary factors.

According to Dr. Reinhold Leichtfuss, senior partner and managing director, “while the performance of Middle East banks settled at high single digit growth figures in 2012, it still compared very well with the international banks which experienced a further revenue decline. This provides the Middle East banks the opportunity to undertake the necessary investments in capabilities and regional expansion. Middle East banks must have the courage to invest.”

Globally, banks have failed to make a strong comeback since being strongly hit by the financial crisis of 2008. But since 2005, the profit and revenue of GCC banks have grown by 11% — boosted by steady economic growth and a strong revenue stream from the oil sector. GCC banks are expected over the next two years to continue to outperform other (worldwide) banking institutions.

With a 12% increase, banks in Qatar show the best performance, earning an 8% profit. At the same time, lenders in Saudi Arabia and Oman showed 8% growth and a 7% increase in operating income. The GCC’s largest banks saw an approximate increase of 5% in total revenues.

Kuwait reported the highest increase in loan-loss provisions at 31%, while lenders in Oman cut their loan-loss provisions to 18% over the same period.

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