The net profits of the GCC banking sector show an increase; reached $ 9.4 billion in the third quarter

GCC’s banking sector net profits showed a quarter-on-quarter increase almost equivalent to the decline in the allowance for loan losses (LLP) in the third quarter of 2021, according to asset management firm Kamco Invest.

Total banking sector net profits reached $ 9.4 billion in Q3-2021, up from $ 8.3 billion in Q2-2021.

Profits remained below pre-Covid levels of $ 10.2 billion reported in the third quarter of 2019. Nonetheless, quarter-on-quarter growth was seen across the GCC except for Oman, banks of Saudi Arabia, Kuwait and Bahrain recording double-digit growth.

Saudi banks’ reported profits hit one of the highest quarterly levels of $ 3.5 billion, up from $ 2.9 billion in the second quarter of 2021 and $ 3.2 billion in the third quarter of 2020 Banks in the UAE and Qatar posted high single-digit net growth of 7.7% and 7.3%, respectively.

Of the 60 banks that reported profits in the quarter, 19 banks reported a decline in their quarterly net profits in the third quarter of 2021, while in terms of annual growth, nine banks reported a decline. .

Banks that reported a notable drop in their net profits include Bank of Sharjah, which continued to report losses for the fourth quarter in a row at $ 226.9 million, a larger loss compared to a loss of 93.9 million dollars recorded in the second quarter of 2021.

Saudi British Bank also announced a decline in profits in the quarter, mainly due to higher operating expenses.

Provisions for loan losses reported by GCC banks reached their lowest level in the 8th quarter during the third quarter of 2021. Aggregate LLP was $ 3.2 billion in the quarter, up from 4 , $ 1 billion in the second quarter of 2021 and $ 4.4 billion in the third quarter of 2020. The quarter-on-quarter decline of LLP was observed in the GCC, except UAE banks listed in Oman and Saudi Arabia reporting the largest drop at 45.4% and 44.2%, respectively.

The absolute decline was highest in Saudi Arabia at $ 0.5 billion with an LLP total of $ 0.7 billion at the end of the quarter, almost in line with the LLP for Qatari banks. UAE-listed banks, on the other hand, posted the biggest LLP of $ 1.3 billion after reporting 0.1% quarter-on-quarter marginal growth in the third quarter of 2021.

Lending activity remained robust in the third quarter of 2021, resulting in record loan portfolios, although growth in the quarter was much lower compared to the previous quarter. Aggregate gross lending at the end of the quarter reached $ 1.71 trillion, up 1.7% quarter-on-quarter and 6.8% year-on-year, once again driven by widespread growth seen across all the steps.

Net lending grew slightly slower 1.6% quarter-on-quarter to $ 1.62 trillion, supported by growth in all markets except Omani banks. Bank lending in the region has been supported by solid and continued economic growth with the resumption of vaccinations and the easing of restrictions.

Customer deposits also increased in all markets during the quarter. Total customer deposits rose 2.0% to $ 2.03 trillion, a new record for GCC banking, from $ 2.0 trillion at the end of Q2-2021.

Saudi banks recorded the strongest absolute sequential growth in customer deposits, followed by banks in the United Arab Emirates and Qatar, while growth of Omani banks remained subdued.

Higher growth in customer deposits during the quarter compared to loan growth resulted in a slight decrease in the loan-to-deposit ratio for the GCC banking sector. The aggregate loan-to-deposit ratio fell 30 basis points qoq to 80.1%, still below pre-Covid-19 levels.

The short-term outlook for the sector remains positive, with the exception of some countries. Saudi Arabia continues to drive development activity with an increasing number of projects being implemented as well as several PPP projects. In a recent report, S&P expressed optimism about the Saudi banking sector due to the growth in mortgages and the implementation of the Vision 2030 projects.

That said, the uncertainties surrounding new variants of Covid-19 and the resulting restrictions may undermine the region’s overall growth. This, together with an expected increase in interest rates, may affect the overall growth of short-term loans. TradeArabia News Service

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