The Banking Executive Magazine - August 2021

GCC banks Bahrain reported marginal absolute increase in provisions during the sec- ond quarter, whereas UAE, Kuwaiti and Omani banks reported a QoQ decline in provisions booked during Q2-2021. GCC banking sector net profits re- mained stable during Q2-2021 after witnessing recovery during Q1-2021 to reach pre-covid levels. Profits reached $8.3bn during the quarter, up 82.8pc YoY and 0.3pc se- quentially. The YoY growth in profits was seen across the region after recording low profits reported last year. In terms of QoQ growth, Bahrain and Saudi Arabia were the only ex- changes that reported QoQ decline in profits while the aggregates for the rest of the exchanges reported growth. Total operating expenses for GCC banks stood at $8.5bn during Q2- 2021 as compared with $8.2bn in Q1-2021. UAE, Qatar, and Omani banks re- ported a sequential decline in oper- ating costs, whereas Saudi Arabia followed by Bahrain and Kuwait reported higher costs during the sec- ond quarter. At the country level, costs remain the highest in the case of Bahraini banks at 60.3pc followed by Omani banks at 47.2pc. Total revenue for GCC banks in- creased by 3.5pc QoQ during Q2- 2021 after seeing a decline during the previous quarter. The increase in Q2-2021 was mainly led by higher net interest income that was partially offset by a decline in non-interest income. Non-interest income declined by 2.3pc QoQ during Q2-2021 to $6.5bn versus $6.7bn during Q1- 2021. The decline was mainly led by de- cline in non-interest income reported by banks in the UAE and Qatar that was partially offset by higher non-in- terest income reported by banks in Bahrain and Kuwait. On the other hand, aggregate net in- terest income showed a healthy in- crease of 6.3pc QoQ during Q2-2021 to $15.3bn. The QoQ growth came because of a broad-based increase in net interest income across the six exchanges in the GCC. The aggregate provision cover (ex- cluding Saudi Arabian banks) that GCC banks made against stage 3 bad loans stood at 66.4pc at the end of Q2-2021. The provision cover has increased consistently since last year when it stood at 64.7pc (excluding Saudi Arabian banks) and in Q1-2021 standing at 65.4pc. Bahraini banks boasted the second- highest cover against stage 3 bad loans in the GCC during the quarter at 69.1pc. On the policy front, the economic re- sumption post the Covid-19 restric- tions saw several targeted government support programmes an- nounced in the region with an aim to support vulnerable sectors as well as to provide benefits including em- ployment support, start-up ecosys- tem and sector specific assistance programmes. “Businesses are also keen on financ- ing new projects with the ongoing low interest rates and the expectation that the rates would remain low till end of 2022,” said Kamco Invest’s head of investment strategy and re- search Junaid Ansari. ISSUE 152 AUGUST 2021 the BANKING EXECUTIVE 17