Lower provisions along with improving business environment boosted the net profits of Gulf banks by 18 per cent in the first quarter of 2011 over the same period of 2011 and Qatari emerged as the star performers.
The 22 banks covered by the Kuwaiti-based Global Investment House (GIH) performed better after a rise in interest income and a sharp decline in allocations for loan loss provisions, GIH said in a study.
It showed the combined net income of the banks from the six-nation Gulf Cooperation Council (GCC) swelled by 18 per cent year-on-year in the first quarter of 2012 and as high as 38 per cent over the fourth quarter of 2011.
“GCC banks under our coverage saw their profits improving mainly on account of strong interest income as well as lower provisioning expense and operating costs,” the report said.
“The aggregate quarterly profit is the highest recorded in the past five years. Qatar once again exhibited the strongest YoY and QoQ growth in profits with a rate of 58 and 68 per cent respectively.”
The report showed all GCC members recorded a significant increase in profits in both YoY and QoQ periods with the exception of UAE.
Although on a QoQ basis, aggregate profits by UAE banks under GIH’s coverage were up by 50 per cent, they dipped eight per cent YoY basis.
“However, the figure is impacted by the one off sale of Network International by Emirates NBD in the first quarter of 2011. Adjusting for this, UAE’s aggregate profitability too was up by 61 per cent YoY.”
A breakdown showed profit growth was 13 per cent YoY and 20 per cent QoQ in Saudi Arabia and two per cent and 35 per cent in Kuwait.
The report showed NPL provisions, which recorded a large rise in the fourth quarter, they were cut by nearly 46 per cent in the first quarter of 2012.
While on a QoQ basis, provision expense has come down for all countries, on a YoY basis, banks in the UAE and Kuwait recorded a decline in provisioning by around 14 and 15 per cent respectively, the report said.
“In UAE, all banks under our coverage saw a decline in provisioning expense with the exception of Union National Bank which saw its provisioning expense go up by 67 per cent with annualized net cost of risk standing at 81bps in 1Q12 against 50bps in 1Q11,” GIH said.
“The story was the same for Kuwait with National Bank of Kuwait being the only exception where provisioning expense shot up by 21 per cent and cost of risk (annualized) stood at 39bps at the end of 1Q12.”
On the other hand, Saudi Arabia and Qatar witnessed an increase in their provisioning expense on a YoY basis, albeit on a low base, GIH said, adding that despite the increase, both countries cost of risk remained the lowest within the GCC.