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There are still concerns: Emirates NBD, the UAE's biggest bank by assets which made $626.1m in profits during the first nine months of the year, almost surpassing its profits for all of last year, may need to set aside as much as $2.2bn to cover bad loans over the next 13 months, according to a recent research note issued by Goldman Sachs. However the key players in the Saudi banking sector, including Al Rajhi Bank, the kingdom's largest lender by market value, are eyeing steady growth by virtue of their strong profitability, stable asset quality and large retail deposit base. And it's a story that is repeated elsewhere in the Gulf, from Abu Dhabi to Kuwait City to Doha and beyond.
Bank asset growth reinforces lending
According to the UAE Central Bank, total bank assets in the country have registered sound growth in 2011, rising 4% in the first ten months of the year to $455bn as of end-October. This reinforcing of the balance sheets has been accompanied by a healthy rise in lending - loans made by UAE banks edged up by 4.1% in the first ten months of the year, up to $292bn as of end-October, boosted by a significant leap in September. And after a year of consolidation, UAE banks are not alone in moving into 2012 in a comfortable position.
Commercial banks in Saudi Arabia, the region's largest economy boasting its most sophisticated banking sector, registered total assets of $409bn as of end-October 2011, a rise of 7.7% in the first ten months of the year, and a jump of 10.3% since end-October 2010. Lending has increased too, with ten out of 11 Saudi publicly traded banks raising the value of their loan portfolios in the first nine months of the year, according to statements from the banks. Alinma Bank, an Islamic lender, had the largest increase at 75%, followed by Bank Al Jazira at 19%, with Al Rajhi Bank and Bank Al Bilad each registering a 12% increase in the nine months to end-September.
In Kuwait, assets stood at close to $157bn, up 4.9% in the first 10 months and over a 12-month period. Qatar has not yet made available its statistical bulletin for the month, but is expected to register healthy asset growth among local banks, while in Oman the assets of commercial banks stood at $44.7bn as of end-September 2011, the latest available figures, indicating a rise of 9% in the first nine months of the year and an 8.7% rise year-on-year. Only in Bahrain, which has violently suppressed Arab Spring protests, resulting in the deaths of more than 35 people amid allegations of widespread human rights abuses, are the figures less encouraging: the assets of retail and wholesale banks in the island state stood at $536bn as of end-October 2011, down 9.9% since January and 7.4% over a twelve-month period.
Increased competition from global banking groups
It is likely, however, that 2012 will present a different challenge to those banks that have recovered in the wake of the global economic downturn. Competition from global banks is likely to rise as financial houses from outside the region attempt to tap the growth potential of the Gulf market.
Staff
