GCC banks' income down 8.5% to $14.39bn in 2009

The global fiscal crisis and regional debt default problems plunged banks in Gulf oil producers into one of the most turbulent periods in their history last year as their net income shrank by about 8.5 per cent, according to a bank report.

Except for Kuwait, national banks in the other GCC members recorded a decline in 2009. The report by the Kuwait-based Global Investment House (GIH) showed the combined net profits of the 63 banks and financial institutions in the 29-year-old Gulf alliance slumped to about $14.39 billion (Dh52.8bn) last year from nearly $15.74bn in 2008, a decline of 8.56 per cent.

Bahrain, the largest offshore banking centre in the Middle East, suffered from the biggest fall of about 35.2 per cent. In contrast, Kuwait's banks recorded one of their largest increases in net income of about 70 per cent, according to GIH.

The combined net profits of UAE banks receded by 19.18 per cent, while there was a drop of 15.2 per cent in Oman and 10.14 per cent in Saudi Arabia. Banks in Qatar reported a fall of 0.1 per cent.

GIH said its figures on net earnings covered 63 national banks in the GCC countries except five banks that have not disclosed their results yet. "The fiscal year 2009 was seen to be the most difficult in Gulf financial markets with the starting of the default of Saad and Gosaibi Groups," GIH said in a study sent to Emirates Business.

"In reality, the financial performance of the banking sector in the GCC reported drops in net profits by 8.56 per cent last year. This sector recorded increases in net profit in one country in the Gulf, Kuwait, which reported a surge in net profits of 70.22 per cent during that year. The Bahraini banking sector reported the biggest losses in net profit as it declined by 35.23 per cent."

The report noted that the GCC governments are still offering direct and indirect support, which reduced the impact of the crisis on the financial sector. "The Qatari government's role was obvious when it intervened by buying portfolios of listed shares and real estate in banks at a value between QR30bn (Dh30.28bn) and QR50bn. Abu Dhabi government's role was noticeable as it injected $4.36bn in five banks to strengthen their position in the middle of the crisis."

Despite the decline in the overall earnings of the GCC banks, experts believe the general performance was good, considering the business downturn in the aftermath of the crisis, the exposure of some banks to the Saudi default problem and the sharp fall in lending by most regional banks.

"I think it was not a bad year after all," said Ziad Dabbas, financial analyst at the government-controlled National Bank of Abu Dhabi. "The net profits of some members were lower last year mainly because most key banks sharply increased allocations to bad debt provisions at the expense of income."

Most banks in the region stepped up provisioning in 2009 but the bulk of the allocations were reported in the UAE and Saudi Arabia, where provisions for non-performing loans topped Dh12bn and Dh10bn respectively.

"In the Saudi banking sector, the decrease in lending, along with an increase in provisions, had a negative impact on the sector's performance," GIH said.

Its figures showed the net profit of Saudi banks dipped to about $5.82bn in 2009 from $6.48bn in 2008. Out of 11 listed banks, four banks reported growth in net profit for the year of 2009, while six banks recorded a decline and one reported a loss, according to the study.

"In the UAE, the banking sector reported a decline of 19.18 per cent in total net profit for the year of 2009," GIH said. It said the banking sector on the Abu Dhabi stock exchange reported a net income of $2.95bn for 2009 compared to $3.47bn in 2008, recording a decrease of 14.96 per cent. Out of 14 listed banks, eight banks reported a growth in 2009 net profits, while four banks reported a drop.

"In Dubai, the banking sector on the Dubai Financial Market reported a net income of $854.06m for 2009 compared to $1.24bn in 2008, down by about three per cent. Out of seven listed banks, excluding Ajman Bank and Investment Bank which have not disclosed their financial results yet, only one bank reported growth in 2009, which was Commercial Bank of Dubai with an increase of 4.15 per cent, while four banks reported decrease with Emirates Islamic Bank recording the highest fall of 67.35 per cent in net profit."