Dubai: Collective loans disbursed by leading GCC banks increased by 8.4 per cent at the close of the second quarter which were the main driver behind the net interest income which grew by 4.3 per cent during the quarter.
Despite improved lending growth net income margins remained under pressure on due decline in the yield on assets, leading to shrinkage in net interest margins (NIM).
"Loan book growth continues to remain strong across GCC markets, with banks in Qatar witnessing the highest increase of 15.4 per cent. Qatar-based banks maintained their loan growth momentum due to an increase in public sector spending backed by several developmental initiatives taken by the government," said Naveed Ahmed, senior manager of Global Investment House.
Among Qatar-based banks, Commercial Bank of Qatar, Qatar Islamic Bank and Doha Bank registered higher growth in loan book of 33.4 per cent, 31.8 per cent and 25 per cent, respectively.
Economic expansion and huge capital investments, particularly in the infrastructure, SME and manufacturing sectors, remain key growth drivers for the loan book of Saudi banks. Additionally lending growth in the Kingdom is supported by the mortgage lending law.
The loan book of UAE banks grew moderately by 4.8 per cent year on year in the second quarter despite recovery in the real estate sector and overall economic growth. The slowdown in lending is attributed to high credit penetration levels and absence of quality lending opportunities. In addition, some banks have also witnessed sizeable loan repayments during the quarter which dampened net credit offtake numbers. "Due to the recent addition of Dubai Expo 2020 to UAE's to-do list, we expect infrastructure spending to grow significantly in next few years," said Ahmed.
Kuwait based banks recorded a loan growth of 4.6 per cent in the second quart of this year. Within Kuwait, Burgan Bank recorded the highest growth in loan book (21.1 per cent) driven by sound performance of its international operations, followed by National Bank of Kuwait (9.6 per cent) and Gulf Bank (4 per cent).
The net interest income of key GCC banks increased 4.3 per cent year on year and 2.9 per cent quarter on quarter. Non-interest income of GCC banks grew 8.6 per cent during the quarter due to strong growth in fee income with UAE leading the region with 19.2 per cent followed by Saudi Arabia with 16.7 per cent growth. Among the UAE-based banks, ENBD recorded 37.6 per cent growth in non-interest income, followed by National Bank of Abu Dhabi (20.1 per cent) and First Gulf Bank (18 per cent).