The expectations of aggressive rate hike by the US Fed this year followed by higher rates next year is expected to have a positive impact on net interest margins (NIMs) of the Gulf banks, according to Kamco Invest.
The extent to replication of rate hikes by the GCC (Gulf Co-operation Council) central banks vs US Fed Fund rate hikes also affects the trajectory of NIMs in the GCC, Kamco Invest said in a report.
Nevertheless, despite some GCC central banks implementing smaller increase in rates or increasing rates in a phased manner (like in the case of CBK), the overall impact of a fed fund rate hike "is expected to be positive on the aggregate NIM reported by GCC banks."
The healthy increase in net interest income during the second quarter (Q2) was almost fully offset by higher average earning assets during the last four quarters resulting in a flat NIM for the aggregate GCC banking sector.
NIM at 2.8% remained at one of the lowest levels despite the recent rate hikes as the impact of the higher interest rates were only felt during Q2-2022 and "is expected to have a greater impact in the subsequent quarters."
NIM remained relatively stable across the board in the GCC during Q2-2022 compared to the previous quarter with single bps quarter-on-quarter changes.
NIM continued to remain the highest in the case of Saudi Arabian banks at 3.10% during Q2-2022 and it was the only market in the GCC to report NIM of over 3% in the GCC.
There has been a broad-based improvement in revenues across the GCC during the quarter. The increase was mainly led by higher interest rates across the GCC after central banks in the region hiked policy rates following the rate hikes by the US Fed. As a result, net interest income increased by a strong 9.6% to $17.1bn.
In Qatar's banking sector, NIMs stood at 2.66% in the first quarter of 2022, which improved to 2.74% in the second quarter.
The NIMs were at 2.62% in Q1, 2021, which then increased to 2.64% in the subsequent quarter but fell to 2.63% in the third quarter and then rose marginally to 2.64% in the fourth quarter of 2021.
The extent to replication of rate hikes by the GCC (Gulf Co-operation Council) central banks vs US Fed Fund rate hikes also affects the trajectory of NIMs in the GCC, Kamco Invest said in a report.
Nevertheless, despite some GCC central banks implementing smaller increase in rates or increasing rates in a phased manner (like in the case of CBK), the overall impact of a fed fund rate hike "is expected to be positive on the aggregate NIM reported by GCC banks."
The healthy increase in net interest income during the second quarter (Q2) was almost fully offset by higher average earning assets during the last four quarters resulting in a flat NIM for the aggregate GCC banking sector.
NIM at 2.8% remained at one of the lowest levels despite the recent rate hikes as the impact of the higher interest rates were only felt during Q2-2022 and "is expected to have a greater impact in the subsequent quarters."
NIM remained relatively stable across the board in the GCC during Q2-2022 compared to the previous quarter with single bps quarter-on-quarter changes.
NIM continued to remain the highest in the case of Saudi Arabian banks at 3.10% during Q2-2022 and it was the only market in the GCC to report NIM of over 3% in the GCC.
There has been a broad-based improvement in revenues across the GCC during the quarter. The increase was mainly led by higher interest rates across the GCC after central banks in the region hiked policy rates following the rate hikes by the US Fed. As a result, net interest income increased by a strong 9.6% to $17.1bn.
In Qatar's banking sector, NIMs stood at 2.66% in the first quarter of 2022, which improved to 2.74% in the second quarter.
The NIMs were at 2.62% in Q1, 2021, which then increased to 2.64% in the subsequent quarter but fell to 2.63% in the third quarter and then rose marginally to 2.64% in the fourth quarter of 2021.
