UAE, Qatari banks star performers in Q2

The net profits of banks in Gulf oil producers surged by around 28 per cent in the second quarter of 2011 and those in the UAE and Qatar emerged as the best performers, according to a Kuwait investment bank.

Global Investment House (GIH) said better banking performance in the six-nation Gulf Cooperation Council (GCC) was a result of improving economic conditions, recovering credit and lower loan loss provisions by most banks.

“GCC banks under our coverage saw another good quarter with profits rising 28 per cent YoY and four per cent QoQ,” GIH said.

“Banks in the UAE and Qatar stood out in terms of highest profit growth achieved during the quarter while Oman was the only country that witnessed a decline.”

The report showed provisions by GCC banks covered by the survey declined by nearly 15 per cent YoY and the bulk of the drop was in Saudi Arabia, where banks’ provisions slumped by around 53 per cent. Banks in the UAE and Qatar saw a decline of around 9-10 per cent YoY.

“On an aggregate level, GCC banks witnessed a healthy growth in the net interest income (+7%YoY) and exhibited a strong rise in non-interest income(+23%YoY),” the study said.

“A major contributor to the jump in profits was the significant drop in provisions….. Speaking sequentially, while profits were up four per cent QoQ, the credit goes to a robust jump in NII (+5%QoQ) since non-interest income retreated (-3 per cent QoQ) and provisions rose seven per cent QoQ.”

Kuwait & Oman offer a stinging negative surprise for 2Q11.

The report said that although the banking sector in the GCC, excluding Saudi Arabia, saw a rise in their net interest income, Qatar, Kuwait and UAE banks saw the highest jump in their net interest income in the second quarter, up 13%YoY, 13%YoY and 12%YoY respectively.

Qatar’s top-line rose on account of robust volumetric growth (loans jumped 19%YoY and interest earning assets (IEA) grew 34%YoY) while net interest margin (NIM) eroded by 44bps.

“As for UAE a joint effort from both the factors led to the mentioned performance with the IEA up 10 per cent YoY (net loans up by three per cent YoY) and NIM increased by 5bps. On a quarterly basis however, volumes shrank by 0.5 per cent QoQ exhibiting stagnancy while NIM increased by a heavy 11bps – nonetheless UAE banks secured a 6%QoQ jump in NII.”

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