GCC listed banks’ profit surges 35.8% to $34.5b

The Gulf banking sector recorded strong growth in 2021 with listed banks posting a 35.8 per cent surge in its net profit to $34.5 billion from $25.4 billion in 2020, led by the growth surge in loan book, reduction in the costs of funds, according to KPMG.

Kuwait topped the list with a 91.4 per cent growth in the net profits of GCC-listed banks in the country which surged to $2.9 billion from 2020’s figure of $1.52 billion, KPMG said in the seventh edition of its GCC listed banks’ results report titled ‘A new reality.’

The report analyses and compares the financial outcomes and key performance indicators for the leading listed commercial banks to the previous year.

According to a recent report by Kamco Invest, an investment consultancy, profitability for the GCC banking sector in 2021 jumped 40 per cent to $35 billion, one of the highest yearly levels, driven by an increase in total bank revenue as well as a decline in loan loss provisions.

The surge in profits although remained below pre-pandemic levels of $37 billion reported in 2019 pushed aggregate return on equity (ROE) for the GCC banking sector to a seven-quarter high.

The year-on-year increase in 2021 was broad-based across the GCC with profits for Kuwaiti banks almost doubled to $2.9 billion.

Kamco report pointed out that Saudi and the UAE-listed banks reported healthy profit growth of 40.2 per cent and 52.6 per cent during the year. Higher profits also pushed the aggregate return on equity for the sector to a seven-quarter high level of 10.4 per cent at the end of 2021 as compared to 9.6 per cent in Q3-2021 and 8.1 per cent at the end of 2020.

KPMG report noted that total assets in Kuwait grew from $301.6 billion in 2020 to $320.7 billion in 2021, climbing by about 6.3 per cent. This report provides banking industry leaders with succinct analysis along with insights and forward-looking views and also highlights some of the major financial trends identified in the banking sector across the region.

Bhavesh Gandhi, head of Financial Services, KPMG in Kuwait, said in the last two years, the banking sector has witnessed cautious growth as banks focused on embracing technology and reducing costs. “This strategy turned out to be the correct one, as the sector has gone through unprecedented growth and profits exceeded expectations this year.”

“The banks within the GCC continue to accelerate digital investments, providing a digital-first approach to the customers and partnering with various fintech firms to make banking more accessible to all,” he stated.

The listed bank share prices also witnessed a 36.6 per cent rise, while the total assets, return on equity (RoE) and return on assets (RoA) grew by 6.4 per cent, 2.8 per cent and 0.3 per cent, respectively.

The banking sector in the region also saw an increase in the capital adequacy ratio (CAR) to a sector average of 19 per cent and a reduction in the cost-to-income ratio by 0.3 per cent, he added.

Kuwait remained on top in terms of net profit by average and RoE and had the second-best RoA after Saudi Arabia in the GCC region.

— issacjohn@khaleejtimes.com