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Doha: Qatari banks showed the highest cover against stage 3 bad loans at 99.2 percent in the Gulf Cooperation Council (GCC) during the second quarter (Q2) of the current year, said a recent report by Kamco Invest.
The aggregate provision cover that GCC banks made against stage 3 bad loans stood at 71.7 percent at the end of Q2-2022. The provision cover has increased consistently over the last three quarters when it stood at 69.8 percent in Q1-2022 and 67.1 percent at the end of Q4-2021. “Qatari banks boasted the highest cover against stage 3 bad loans in the GCC during the quarter at 99.2 percent, higher than Q1-2022 cover of 95.9 percent. Bahraini banks were next at 70.5 percent during Q2-2022 while the ratio for the rest of the region remained below the 70 percent mark,” the report noted.
“The average share of bad loans (stage 3 loans) on GCC banks’ loan books declined slightly to 3.4 percent during Q2-2022 as compared to 3.6 percent at the end of Q1-2022 and 4.1 percent at the end of Q1-2021. Non-performing loans for UAE banks continued to remain the highest in the GCC at 5.5 percent of aggregate gross loans at the end of the second quarter of the year, 30 bps below Q1-2022 share and significantly below Q2-2021 level of 6 percent.
On the other hand, Kuwaiti banks reported the lowest bad loans on their books at 1.6 percent at the end of Q1-2022, in line with Q1-2022 while a steep drop from 2.7 percent last year. Stage 2 provision cover at the GCC level stood at 8.4 percent in Q2-2022, a slight drop from 8.5 percent in Q1-2022 with Omani banks showing the biggest cover of 20.7 percent while Saudi Arabian banks reported the smallest cover at this stage at 5.8 percent.
The report stated that GCC banking sector net profits reached another record level of $11.1bn in Q2-2022 registering a quarter on quarter (q-o-q) growth of 1.9 percent and a year on year (y-o-y) growth of 31.9 percent. The increase in aggregate profits was mainly led by higher revenues for the sector coupled with a slight drop in provisions during the quarter. The growth came after aggregates for all the countries in the GCC reported increase, barring Kuwaiti banks that reported a q-o-q decline of 0.6 percent mainly led by higher operating expenses.
“Omani banks reported the biggest q-o-q percentage increase in net profits during the quarter at 13.9 percent followed by Qatari and Bahraini banks with growth of 3.6 percent and 3.2 percent. Growth in Saudi Arabian banks stood at 2.7 percent while UAE banks showed flattish net profits during the quarter. In terms of y-o-y growth, aggregates for almost all countries in the GCC showed strong double-digit growth during Q2-2022,” it added.
The total bank revenue for GCC banks registered a healthy q-o-q growth of 4.8 percent during Q2-2022 to reach $24.9bn as compared to $23.7bn during Q1-2022. The q-o-q increase was led by 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 percent to reach $17.1bn. However, this increase was partially offset by a q-o-q drop in non-interest income that reached $7.7bn in Q2-2022 registering a q-o-q decline of 4.5 percent. The drop in non-interest income reflected the quarterly decline in global and regional financial markets during the quarter that affected investments banks’ balance sheet,” the report said.
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