Gulf banks 'unlikely to see pre-crisis level growth'
Dubai, April 26, 2011
Banks in the Gulf region are unlikely to witness the high growth levels seen before the financial crisis as real estate-driven lending and income growth subsides, the Boston Consulting Group said on Tuesday.
Middle East banks saw rapid growth rates between 2005 and 2008 but were severely hurt during the financial crisis and were forced to curb lending and set aside more money to meet loan losses due to some high-profile corporate defaults.
'Since 2008, the time of very strong growth is over in the region and ... returning to pre-crisis development in the foreseeable future is unlikely,' Reinhold Leichtfuss, senior partner and managing director in BCG's Dubai office said in the report.
BCG's survey of 35 banks in the Middle East showed that banking revenues stagnated in the region during 2010, while profits increased significantly due to lower loan provisions, which despite a 17 percent drop still stood at $8 billion.
However, provisions may be on the decline, Leichtfuss said in a separate email statement.
'The LLP (loan loss provision) levels of 2009 and 2010 have been extraordinarily high and we anticipate that banks will return to more normal levels,' he said.
Banks will also need to increase their productivity and boost efficiency of their processes instead of just reducing costs, the report said.
Qatar and Omani banks recorded the strongest revenue growth in 2010 with an increase of 14 percent and 13 percent, respectively, the report stated, while Saudi Arabian lenders saw relatively stable revenue growth.
In the event of a slower rate of growth, competition in the industry will increase, with higher discrepancy in the performance among banks, the BCG report said.
'The winners will be those who tackle these inefficiencies in their operating models quickly and find the right competitive positioning and go-to-market model,' Leichtfuss said. - Reuters
More Finance & Capital Market Stories
- Qatar sets up mixed business incubator
- Kuwait budget spending up 8pc in April-Jan
- Thomson Reuters to host Mena IFR awards
- ADIB offers smartphone industry investment
- Gulf Finance House to start $3bn Tunisia project
- KFH completes ICT project upgrade
- Egypt urban annual inflation slows to 9.8pc
- BIBF signs deal with Palestinian institute
- Bahrain’s GDP set to expand 12pc
- KFH-Bahrain rebrands priority banking
- Bank Nizwa wins top Islamic bank award
- Qatar labour costs may jump: IMF
- Kuwait Q3 trade surplus hits $23bn
- Dubai trade growth up 7.6pc to $362bn
- Deloitte appoints new managing director
- Al Ramz tops UAE trading in Feb
- IFC in $150m loan deal with Bank Audi
- SME funding focus for Abu Dhabi forum
- Insurance House posts second year of profit
- ETF global assets hit record $2.44 trillion
- Bahrain firms plan IPOs
- Serbia wins $1bn Abu Dhabi loan
- Key equity banker resigns from Saudi Fransi
- DMCC to boost Islamic commodity trade with tie-ups
- IDB, KIA units to invest in Morocco
- First Gulf to set up $1bn sukuk in Malaysia
- Singapore’s UOB Bullion and Futures joins DGCX
- Infrastructure investment ‘key to growth’
- BKIC declares 30pc dividend
- StanChart profit falls 16pc in 2013