Banks in Gulf oil producers are pushing ahead with a drive to build up loan loss provisions in the wake of the 2008 global fiscal distress and regional debt default problems, with those of key banks soaring by 59 per cent in the fourth quarter over the previous quarter, according to a Kuwaiti bank.
Provisions by the 22 banks covered in the report by Global Investment House (GIH) about the banking sector in the six-nation Gulf Cooperation Council (GCC) also jumped by around 51 per cent year-on-year.
Saudi Arabia was the only country whose banks recorded a decline in provisions YoY while Kuwait and the UAE accounted for the bulk of Q4 provisions.
Kuwait contributed around 60% of the incremental provisions taken by GCC banks, as compared to the previous quarter and a similar figure if compared on YoY basis, GIH said in its 20-page study.
Provisions leaped by nearly150% both on YoY and QoQ basis and all banks under coverage saw a sharp rise in provisions.
However Kuwait Finance House (KFH) fared the worst and saw its provisions rising 2.5 times over the previous quarter and 118%YoY. “These were the highest quarterly provisions taken by KFH since 4Q08.”
The next largest contribution to GCC banking provisions came from UAE, where provisions jumped by 47%YoY and 20%QoQ.
“The UAE continued to take high provisions in the wake of Dubai’s debt issue and to meet the general provision guidelines introduced by the central bank.”
The report said that while the Abu Dhabi-based First Gulf Bank was the only institution that saw a decline in provisions both on YoY and QoQ basis, Dubai-based ENBD and Union National Bank in Abu Dhabi can be pointed out as the banks that contributed most to the increase in provisions during the quarter.
The Qatari banking sector was not immune to excessive provisions during 4Q11 and saw a massive building up during the period led by Qatar National Bank and Qatari Islamic Bank, according to GIH.
Turning to earnings, the report said the combined net profits of the 22 banks grew by around eight per cent YoY in the fourth quarter but declined by nearly 13 per cent compared with the third quarter.
“This was the second consecutive quarterly slip during the year after the banks reached the highest quarterly profit ever in 2Q11 since 2Q08,” it said.
It said Kuwait was the only country that witnessed a decline in profits YoY, with the net income sliding by about 22%YoY.
“Qatar saw the highest growth up by a similar figure….on a QoQ basis, all the GCC countries saw a decline in profitability, again with Kuwait exhibiting the highest decline and Qatar, the lowest,” GIH said.