GCC banks’ loan books hit record high of $1.68t as economy rebounds

Banks in the GCC continued to post robust growth in lending activity, as economic recovery gathered pace during the second quarter resulting in record high loan books of $1.68 trillion, analysts at an investment bank said on Wednesday.

Gross loans of listed banks in the GCC at the end of the quarter jumped 4.6 per cent q-o-q and 7.1 per cent y-o-y, after a broad-based growth seen in all the markets, analysts at Kamco Invest said in their GCC Banking Report.

Total bank revenue for GCC banks increased by 3.5 per cent q-o-q during Q2-2021 after seeing a decline during the previous quarter. The increase in Q2-2021 was mainly led by higher net interest income that was partially offset by a decline in non-interest income.

Banks in the UAE continued to account for the biggest share of regional banking balance sheet with total assets of $840 billion. They were followed by Saudi Arabian banks at $771 billion or 26.7 per cent of the aggregate.

Gross credit extended by banks in the UAE witnessed a marginal growth of 0.9 per cent during Q2-2021 after showing declines of 1.4 per cent during the previous two quarters. Total gross credit stood at Dh1.77 trillion at the end of Q2-2021, based on preliminary numbers, slightly higher than pre-pandemic gross credit of Dh1.76 trillion at the end of 2019.

Banks based in the UAE reported the biggest increase in profits during the second quarter, registering a growth of 11.8 per cent after nine out of 16 listed banks in the UAE reported an increase in net profits. First Abu Dhabi Bank reported the biggest absolute growth in profits that reached $783.7 million in Q2-2021 as compared to $674 million in Q1-2021. ADCB and Dubai Islamic Bank followed in terms of absolute profit growth, registering increases of 25.1 per cent and 19.3 per cent q-o-q, respectively. On the other hand, Bank of Sharjah continued to report loss during the quarter that reached $93.9 million in Q2-2021.

Across the GCC, net loans of the banks recorded a similar growth of 4.8 per cent q-o-q to reach $1.6 trillion, once again backed by growth in all the markets. “Faster economic activity was evident in the PMI figures for UAE and Saudi Arabia that remained elevated during May-2021 and June2021, well above the growth mark of 50. Customer deposits also showed growth in almost all the markets during the quarter,” said the report.

Customer deposits increased by 4.6 per cent during the quarter to reach $2.0 trillion, a new record high for the GCC banking sector, as compared to $1.9 trillion at the end of Q1-2021.

Saudi Arabian banks reported the biggest sequential growth in customer deposits while Qatari banks’ customer deposits remained almost flat with a marginal decline of 0.1 per cent. The aggregate loan-to-deposit ratio for the sector improved slightly q-o-q by 20 bps to 80.4 per cent, the highest in the last five quarters, but still below pre-Covid-19 levels.

Total banking sector assets in the GCC continued to show growth reaching a new record high of $2.64 trillion, registering a growth of 4.7 per cent q-o-q and 6.7 per cent y-o-y during Q2- 2021. “Growth was seen in most markets in the GCC barring Qatari banks that reported a marginal q-o-q decline of 0.5 per cent,” Kamco report said.

issacjohn@khaleejtimes.com