Qatari banks continued to have the highest average return on equity (ROE) among the lenders in the Gulf Co-operation Council (GCC) at the end of fourth quarter (Q4) of 2021, according to Kamco Invest.
Doha's banking sector saw a ROE of 12% at the end of Q4-2021, which was higher than the GCC average of 10%, Kamco Invest said in a report.
In the case of Saudi Arabian lenders, the ROE stood at 11.1%, the UAE 10.3%, 8.4% in Bahrain, 8.2% in Kuwait and 6.9% in Oman.
Revenue growth was broad-based across the GCC with Qatari banks reporting the biggest growth of 9.9% followed by the UAE and Kuwaiti banks revenue growth of 9% and 7.1%, respectively, the report said.
Net profit for the GCC banking sector increased by 40% year-on-year to $35bn in 2021, it said, highlighting that the growth in profits during the year was led by an increase in total bank revenue as well as a decline in loan loss provisions (LLP).
In terms of quarterly trend, LLP increased by 17.6% quarter-on-quarter but fell by 39.2% year-on-year to $3.8bn during Q4-2021. The quarterly growth was mainly led by an 85.6% increase in provisions booked by Qatari banks along with marginal growth in Saudi and Bahraini banks.
The overall growth was partially offset by $0.1bn and $0.2bn quarter-on-quarter drop in provisions booked by Kuwaiti and UAE-listed banks during Q4-2021.
The report said NIMs (net interest margins) remained stable at a multi-quarter low level of 2.8% at the end of 2021, reflecting the full year impact of low interest rates as well as normal economic activity for most part of the year in the GCC.
In addition, a smaller growth in net interest income vs earning assets kept a cap on net interest margin growth during Q4-2021.
In terms of country-specific trends, NIMs declined quarter-on-quarter in four out of six GCC countries during Q4-2021. Kuwait reported the biggest drop of 0.06% to report a net interest margin of 2.62% followed by 5 basis points decline in the case of Saudi Arabia.
However, NIM continued to remain the highest in the case of Saudi Arabian banks at 3.2% during Q4-2021 and it was the only market in the GCC to report NIM of over 3% in the GCC.
Kamco Invest said the aggregate provision cover made by the GCC banks against Stage 3 bad loans stood at 67.5% at the end of Q4-2021. The provision cover has increased consistently since last year when it stood at 63.3% at the end of Q4-2020.
Qatari banks had the highest cover against Stage 3 bad loans during the quarter at 91.9% against the GCC average of 67.5%. However, Qatar's Q4 levels was higher than Q4-2020 cover of 88.4% but significantly lower than Q3-2021 cover of 94.3% after five out of eight listed banks reported a jump in Stage 3 provisions during Q4-2021.
In the case of Bahrain banks, the provision cover against Stage 3 bad loans was 72%, Oman (66.5%), the UAE (62.5%), Saudi Arabia (61.3%) and Kuwait (59.7%).
Total absolute increase in bad loans amounted to $383mn during the quarter as against provisions increase of $139.8mn for Qatari banks. Bahraini banks were next at 72% followed by Omani and the UAE-listed banks at 66.5% and 62.5%, respectively. Kuwaiti banks reported the lowest Stage 3 provision cover of 59.7%.
Doha's banking sector saw a ROE of 12% at the end of Q4-2021, which was higher than the GCC average of 10%, Kamco Invest said in a report.
In the case of Saudi Arabian lenders, the ROE stood at 11.1%, the UAE 10.3%, 8.4% in Bahrain, 8.2% in Kuwait and 6.9% in Oman.
Revenue growth was broad-based across the GCC with Qatari banks reporting the biggest growth of 9.9% followed by the UAE and Kuwaiti banks revenue growth of 9% and 7.1%, respectively, the report said.
Net profit for the GCC banking sector increased by 40% year-on-year to $35bn in 2021, it said, highlighting that the growth in profits during the year was led by an increase in total bank revenue as well as a decline in loan loss provisions (LLP).
In terms of quarterly trend, LLP increased by 17.6% quarter-on-quarter but fell by 39.2% year-on-year to $3.8bn during Q4-2021. The quarterly growth was mainly led by an 85.6% increase in provisions booked by Qatari banks along with marginal growth in Saudi and Bahraini banks.
The overall growth was partially offset by $0.1bn and $0.2bn quarter-on-quarter drop in provisions booked by Kuwaiti and UAE-listed banks during Q4-2021.
The report said NIMs (net interest margins) remained stable at a multi-quarter low level of 2.8% at the end of 2021, reflecting the full year impact of low interest rates as well as normal economic activity for most part of the year in the GCC.
In addition, a smaller growth in net interest income vs earning assets kept a cap on net interest margin growth during Q4-2021.
In terms of country-specific trends, NIMs declined quarter-on-quarter in four out of six GCC countries during Q4-2021. Kuwait reported the biggest drop of 0.06% to report a net interest margin of 2.62% followed by 5 basis points decline in the case of Saudi Arabia.
However, NIM continued to remain the highest in the case of Saudi Arabian banks at 3.2% during Q4-2021 and it was the only market in the GCC to report NIM of over 3% in the GCC.
Kamco Invest said the aggregate provision cover made by the GCC banks against Stage 3 bad loans stood at 67.5% at the end of Q4-2021. The provision cover has increased consistently since last year when it stood at 63.3% at the end of Q4-2020.
Qatari banks had the highest cover against Stage 3 bad loans during the quarter at 91.9% against the GCC average of 67.5%. However, Qatar's Q4 levels was higher than Q4-2020 cover of 88.4% but significantly lower than Q3-2021 cover of 94.3% after five out of eight listed banks reported a jump in Stage 3 provisions during Q4-2021.
In the case of Bahrain banks, the provision cover against Stage 3 bad loans was 72%, Oman (66.5%), the UAE (62.5%), Saudi Arabia (61.3%) and Kuwait (59.7%).
Total absolute increase in bad loans amounted to $383mn during the quarter as against provisions increase of $139.8mn for Qatari banks. Bahraini banks were next at 72% followed by Omani and the UAE-listed banks at 66.5% and 62.5%, respectively. Kuwaiti banks reported the lowest Stage 3 provision cover of 59.7%.
