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Sat 12 Apr 2014 10:24 AM

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Gulf banking revenues outperform global rivals in 2013

New report also says loan loss provisions and profits varied significantly by country in Gulf region

Gulf banking revenues outperform global rivals in 2013

Gulf banks posted double digit revenue growth last year, surpassing the performance of international peers, according to a new report by The Boston Consulting Group .

The study showed that banking revenues in the region continued to grow and reach double digit rates in 2013 with a 10.7 percent increase, while profits increased by 10.3 percent, driven largely by international acquisitions.

The report, which covers the largest banks in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and in the UAE, showed revenues of banks in Qatar grew by 20 percent while banks in the UAE returned to double digit growth overall.

Saudi, Omani and Bahraini banks posted single digit growth rates. The spread of profit growth rates was particularly wide - while banks in Bahrain enjoyed 30 percent profit increase and 19 percent in the UAE, banks in Kuwait had to cope with double digit reductions.

In 2013, loan loss provisions varied significantly by country. Banks in Qatar and Kuwait had to build higher provisions due to increasing delinquencies but UAE and Saudi banks by and large repeated the provision levels of 2012 of $3.3 billion and $1.7 billion respectively.

The overall growth of revenues exceeded the growth in the segments by about 4 percent' indicating that growth was largely due to several significant acquisitions of foreign banks, the report added.

In 2013, retail banking revenues in the GCC experienced a further uptick of 7.2 percent, largely due to an increase in the UAE.

Qatar and Kuwait had retail banking revenues in the high single digits, close to 10 percent, followed by the Saudi banks with a healthy 5.9 percent. Bahrain stayed at the same level as 2012, with no revenue growth while Oman declined.

GCC retail profits, which had been declining for several years, saw an uptick of 5.8 percent compared to 3.5 percent last year. Nevertheless, the profit level in 2013 remained slightly below 2006 levels.

Leichtfuss added: "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 who were able to build strong business models and execute decisively, grow the strongest. This is of course easier said than done."

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