S&P Global Ratings forecasts mid single-digit growth for Islamic banks operating in the Gulf region
Islamic banks in the GCC are expected to show resilience over the next two years after weathering tough market conditions in 2018, according to new research.
S&P Global Ratings said in a report that in 2018, GCC Islamic banks expanded slower than conventional peers for the first time in five years.
Mohamed Damak, S&P Global Ratings head of Islamic finance, added that conventional and Islamic banks are likely to see similar growth patterns in 2019-2020.
"We project mid-single-digit growth for both types of banks due to several factors. These include our forecast of muted GCC economic growth over this period, despite some benefit from government spending and strategic initiatives such as national transformation plans, the 2022 FIFA World Cup, and Dubai Expo 2020," he said in the report.
S&P said that GCC Islamic banks saw customer deposits growth halve to 2.5 percent in 2018, compared to 6.4 percent in 2017, on the back of the relinquishing of some expensive deposits and the depreciation of the Turkish lira, which affected the US-dollar-denominated financial results of some banks in our sample.
"However, thanks to relatively muted loan growth, the funding profile of these banks remained stable and comparable with conventional peers," it added.
The popularity of Islamic banking products continues to grow in the UAE among both Muslim and non-Muslim customers, according to research carried out late last year.
The findings of the 2018 Islamic Banking Index by Emirates Islamic said that Islamic banks are outperforming their conventional peers in customer acquisition.
It noted that 55 percent of UAE consumers now have at least one Islamic banking product, compared to 47 percent when the index was launched in 2015.
In contrast, the penetration score for conventional bank products has shrunk from 69 percent in 2017 to 63 percent in 2018, according to the index.