GCC banks recorded a marginal growth in profitability, with the UAE lenders driving the upswing by posting 9.7 per cent surge in third-quarter year-on-year profits. Net profits of GCC banks covered by Global Investment House analysts increased 1.3 per cent to $4.4 billion in the third quarter. Profitability of banks in Saudi Arabia and Qatar also increased by respective six per cent and 0.6 per cent, while net profit of Kuwait based banks fall 31.4 per cent, Global said in a review. Loan book growth among GCC banks continued to remain strong by recording a growth of 13.6 per cent to $648.7 billion in the quarter under review. Banks in Qatar registered the highest growth of 25.4 per cent, followed by those in Saudi Arabia, (11.8 per cent), Kuwait (11.6 per cent) and the UAE (9.6 per cent). "Due to strong growth in loan book net interest income (NII) of the GCC banks rose 10.2 per cent. NII growth was led by Qatar -based banks (25.3 per cent), followed by those in the UAE (11.6 per cent) and Saudi Arabia (5.7 per cent)," Global analysts said. The asset base of the GCC banks expanded 12.4 per cent to $1 trillion in third quarter with all the countries witnessing stable year on year growth. Increase in loan book supported the overall asset growth, said Global. Arqaam Capital said on Sunday it remained strongly "overweight" on the UAE banks. "We believe the recent re-rating of the sector merely prices in a normalisation of the operating environment and does not yet fully capture a new era of growth," the investment bank said. Arqaam expects strong earnings per share, or EPS, growth (15.8 per cent in 2013), driven by an uptick in commercial momentum, a strong income generation and lower cost of risk. "We see continued support for the UAE banks from the strong dividend outlook and enhanced asset quality and liquidity, accompanied by a surge in lending (Expo 2020 to add one per cent per annum), MSCI inclusion and a reduction in very high equity risk premiums," said Arqaam. Net loans of the listed UAE banking sector expanded in by 9.2 per cent in the third quarter. Growth was broadly based on a 10.6 per cent pickup in retail, 11.9 per cent in sovereign and 9.9 per cent in corporate lending. It noted that the UAE Central Bank has fine-tuned regulations with negligible impact on the prospects for growth in lending activity. "Cost of risk is tapering off as the clean-up phase is now behind us. We are more optimistic on asset quality evolution in the UAE , as banks have cleaned up their books, adopted a conservative provisioning approach that has led to increased provision coverage. New non-performing loan formation has slowed down and a pickup in business momentum has started," Arqaam noted.
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