- GCC banking results report analyses results of 56 of the region’s leading listed commercial banks, covering over 90 percent of listed banking assets.
- Net profit has declined for the first time in recent years, predominantly due to margin pressure but banks remain resilient and long-term outlook remains positive despite economic uncertainty.
- Cost-to-income ratios continue to drop reflecting focus on efficiencies.
Bahrain: The overall outlook for the GCC’s banking sector is positive and Bahrain is fairing particular well according to KPMG’s GCC listed bank results report, which analyses the published 2016 financial statements of 56 leading listed commercial banks across Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The report, which covers over 90 percent of the region’s listed banking assets, indicates that banks have performed well over the last 12 months considering margin compressions, increased impairment charges and increased funding costs. Whilst overall, net profit has declined year-on-year for the first time in recent years, asset growth has remained robust at 6.5 percent on average across the region.
Commenting on the results, Jalil Al Aali, Partner and Head of Financial Services at KPMG in Bahrain said, “The challenging economic conditions in the region has led to widespread drop in profits in the past 12 months. In Bahrain, the annual growth in the financial services sector has been strong, from 1.7 percent in 2015 to 7.4 percent as of the third quarter in 2016. However, due to a sharp decline in lending to certain sectors, credit growth in Bahrain experienced renewed slowdown with peaks recorded around the beginning of 2016. Such challenges are making banks seek innovative ways to stay ahead.”
“Technology advancement, high internet and smartphones penetration rates all mean that digital banking is the future. This puts emphasis on innovative customized products and pricing to improve the banking capabilities and meet the expectations of today’s tech-savy customers.” Al Aali added.
Changing global regulatory requirements have clearly had an impact on the sector in the GCC with a number of positive changes being made to bring banks in line with new requirements. Capital adequacy ratios now stand at over 18 percent across the region – above the minimum limits set in Basel III, reflecting effective capital raising activity. Similarly, Basel III requirements are the likely reason for a rise in liquidity ratios across most countries, demonstrating a commitment to adhere to broader global regulations.
The report titled “GCC Listed Bank Results: Navigating Change” is accessible via the KPMG member firm web sites in the Gulf. The report summarizes the published results of the banks on selected key performance indicators for the year ended 31 December 2016 and compares these vis-à-vis prior year.