Dubai: Leaving behind five long years of high provisioning and low profit growth, Gulf Cooperation Council-based (GCC) banks are back on track reporting double-digit profit growth according to key performance indicators in the first two quarters of this year.
"Net profits of GCC banks under our coverage increased 11.1 per cent year on year to $5.3 billion (Dh19.4 billion) in the second quarter of 2014 with Kuwait leading (20.7 per cent), followed by the UAE (20.1 per cent), Saudi Arabia (7.4 per cent) and Qatar (3.5 per cent)," said Naveed Ahmad, senior manager at Global Investment House.
The strong earnings growth is largely attributed to higher net interest income (NII), non-interest income and a 7.7 per cent year-on-year drop in provisions, though an increase in operating expenses partially dampened the profit growth.
Among UAE-based banks, Emirates NBD reported 34.7 per cent growth in net profit due to higher net and non-interest income. The top-line remained robust with the improvement attributable to a favourable shift in the asset mix on account of retail and Islamic business, growth in current and savings account (Casa) deposits and a contribution from Egypt.
National Bank of Abu Dhabi (NBAD) reported 17.5 per cent second quarter growth in bottom-line mainly due to strong growth in non-interest income and a huge decline in provisions.
Abu Dhabi Commercial Bank (ADCB) saw second-quarter profit rise 21.7 per cent, mainly due to a huge decline in provision expenses. First Gulf Bank (FGB) reported 15.7 per cent growth in its bottom-line the second quarter backed by strong growth in net interest income and non-interest income.
In Kuwait, the National Bank of Kuwait registered 28.9 per cent growth in its net profit in the second quarter of 2014. However, this growth was achieved against a poor quarter booked by the bank in the previous year. Moreover, this growth was driven by higher capital gains and lower minority interest while other contributions to growth from key indicators remained muted.
Burgan Bank reported 31.9 per cent growth in bottom-line, mainly attributed to higher net interest income and lower provisions.
Commercial Bank of Kuwait recorded 11.6 per cent year-on-year growth in net profit due to decline in provisions.
Among Saudi-based banks, Saudi Hollandi Bank reported 28.1 per cent year-on-year growth in net profit, primarily driven by a robust 16.7 per cent growth in net special commission income and 17.3 per cent growth in non-special commission income.
Riyad Bank reported a 17.4 per cent growth in its bottom-line due to 7.7 per cent increase in net special commission income and a 29.2 per cent increase in non-special commission income. Banque Saudi Fransi reported a 15.9 per cent growth in bottom-line
In Qatar, Islamic banks outpaced conventional banks with Qatar Islamic Bank reporting a 15 per cent bottom-line growth due to improvement in top-line as well as fee income. Top-line growth was backed by strong financing growth.
Masraf Al Rayan reported a 12.1 per cent growth in its bottom-line due to strong growth in net financing income. However, the Commercial Bank of Qatar disappointed with a 5.5 per cent decline in bottom-line due to huge accumulation of operating expenses (opex) and provision.
During the second quarter, the overall operating expenses of GCC banks grew 4.6 per cent to $3.3 billion, primarily driven by the UAE (10.8 per cent), followed by Saudi Arabia (8.3 per cent) and Qatar (5.8 per cent).
After a significant rise in the last quarter, the operating expenses of Kuwait-based banks declined 8 per cent in the second quarter, helping them improve their bottom-lines.