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Mon 13 Apr 2009 02:01 PM

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Mideast banks to see 'healthy but reduced' growth - study

New report also says banks saw revenue growth of 17% over past 4 years.

Middle East-based banks are predicted to see "healthy but reduced" revenue growth over the next five years as they emerge from the economic crisis in a stronger position than many in the global industry, a new report said on Monday.

The study by The Boston Consulting Group (BCG) also said that banking revenues for the region's largest banks from 2005-2008 had grown by an average on 17 percent.

While the global banking industry has been stumbling from one crisis to the next, leading Middle Eastern banks had performed consistently and strongly, the study added.

The study is part of BCG's annual banking and retail banking indices measured by the development of banking revenues (operating income) and profits for leading global banks.

The Middle East index covers the largest banks in Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE, which constitute around 70 percent of banking assets in the countries.

Dr Reinhold Leichtfuss, senior partner in BCG's Dubai office and leader of BCG’s financial services business in the Middle East, said: "While the vast majority of Middle Eastern banks refrained from investing heavily in secured credit facilities from the US, they are facing region-specific risks such as property market risks.

"However, several of them are more stable due to a traditionally higher share of retail and domestic banking in their overall business portfolio."

According to the index, Saudi banks recorded the lowest revenue growth since 2005 at nine percent while UAE and Qatar banks achieved the highest revenue growth over the four years.

In contrast, profits showed a more troubling picture, as they dropped from their 2007 highs down to 2005 levels in 2008.

"Despite the decline in profits in the Middle Eastern banking system, it is clear that most western banking systems have been hit much more severely by the international financial crisis to date," added Leichtfuss.

He said: "Over the next five years, a healthy but reduced revenue growth can be expected for the Middle Eastern banks. In such an environment, superior strategies, business models, capabilities such as acquisition and integration power, and a strong performance culture are necessary to achieve desired results.

"Some leading Middle Eastern banks have embarked on this route, and the best in a number of specific disciplines will be able to reach the desired goals."

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