Arab banks are expected to gain nearly $300 billion in assets at the end of 2010 to surpass the region’s gross domestic product and this should prompt them to expand their role in the domestic economy, the top Arab banker has said.
The combined assets of the nearly 470 Arab banks could peak at over $2.5 trillion at the end of this year compared with nearly $2.2 trillion at the end of 2009, said Adnan Yousuf, Chairman of the Union of Arab Banks UAB).
Addressing a banking conference in Beirut this week, Yousuf said deposits with the banks as well as their capital are also projected to sharply grow by the end of this year as banks pull out of the clutches of the 2008 global fiscal distress.
In his address, sent by UAB to Emirates 24/7, Yousuf said the surge in the banks’ resources should prompt them to play a greater role in domestic development, urging them to form strategic alliances to create big entities.
“Arab banks are today prepared to play a bigger part on the global level…they should also expand their presence in the local and regional market given their massive financial resources which qualify them to play that role,” he said.
His figures showed the combined assets of the Arab banks are expected to top $2.5 trillion at the end of this year, nearly $300 billion above their 2009 level.
“Forecasts show that the Arab GDP will be around $two trillion this year…this means that the Arab banking sector will outsize the Arab economy,” he said.
His figures also showed the collective deposits with Arab banks could exceed $1.5 trillion by the end of 2010 compared with around $1.16 trillion. Their consolidated capital is expected to climb to a record high of around $300 billion compared with nearly $230 billion at the end of 2009.
Lending by the region’s banks is also forecast to swell to nearly $1.2 trillion from around $one trillion despite a slowdown in domestic credit in many Arab countries, mainly the UAE and other Gulf oil producers.
“Arab banks can pool their resources to boost their regional and global role through merger or the formation of strategic alliances,” he said.
“There is no doubt that creating big Arab banking entities will allow them to play a more active role in channeling investments into the domestic economy and contributing to the development of their countries.”
Yousuf, CEO of the Bahraini-based Albaraka Bank, said Arab banks should play what he described as a “revival train” for the Arab economies, adding that poor domestic credit has contributed to stifling growth.
“In their turn, the Arab governments should open their economies to regional banks to support their role in domestic development,” he said.
“It has become clearer than ever that Arab banks can play an active and pioneering role in stimulating regional economies…the banks should embark on that role, prompted by the fact that Arab economies are heading quickly for a recovery from the global crisis and the fact that they have been only slightly affected by the crisis….furthermore, we believe that the Arab banks possess enormous financial and human resources to play that role.”
UAB’s figures showed the UAE and other Gulf Cooperation Council (GCC) nations accounted for more than half the total Arab bank resources.
The UAE, the largest Arab economy after Saudi Arabia, controlled nearly a fifth of the combined Arab banks’ resources, with its assets peaking at nearly Dh1.62 trillion at the end of October. Along with Saudi Arabia, where bank assets stood at SR1,376 billion at the end of September, their combined assets accounted for nearly a third of the collective assets of all Arab banks.
“Acting as a single bloc has become imperative in the present conditions while the banks should also strengthen coordination with their respective central banks after the crisis showed that most banks could face serious problems and challenges in managing short term liquidity,” Yousuf said.