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Dr Reinhold Leichtfuss

GCC banks register double-digit growth in 2014

DUBAI, March 30, 2015

The banking industry in the Middle East maintained double-digit revenue growth in 2014 with a 10 per cent increase, stemming largely from major customer segments such as retail and corporate banking as well as international business and treasury, said a report.

Increases in operating costs exceeded revenue growth by 10.7 per cent. At an aggregate level, provisions for bad loans decreased by 9.2 per cent; this, in turn, is what served as a key driver of strong profit growth, stated a recent study by The Boston Consulting Group (BCG).

The main customer segments – retail and corporate banking – grew significantly compared to last year, with 7.9 per cent and 8.8 per cent growth rates, respectively.

The difference between bank overall growth and customer business growth is attributable to growth in international business - including acquisitions of banks - as well as in treasury, which increased by 9.8 per cent, said the report.

The profits rose by 14.7 per cent, it added.

“We observe that the gaps between banks' developments are still large. While about 15 to 20 banks achieved double-digit growth rates both in revenues and in profits, three to eight banks had to accept negative growth in revenues or profits overall or across customer segments,” remarked Dr Reinhold Leichtfuss, a senior partner and managing director at BCG's Dubai office and the head of BCG’s Financial Institutions Practice in the Middle East.

Again, the performance of Middle East banks clearly exceeded that of their international counterparts, a number of which experienced further revenue declines in 2014.

Based on the banks’ 2014 annual results released in the first quarter of 2015, the newest study is part of BCG’s annual banking performance indices measuring the development of banking revenues (operating income) and profits for leading Middle East banks.

BCG launched the first edition of the banking performance index in the Middle East in April 2009, creating a customised index specifically for the regional banking markets, with 2005 revenues and profits as starting benchmarks.
The index covers the largest banks in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and in the UAE.

“The 2014 BCG index includes 40 banks from across the GCC, capturing almost 80 per cent of the total regional banking sector,” added Dr. Leichtfuss.

The UAE and Qatari banks showed the strongest growth during the year.

While revenues of banks in the UAE grew by 14 per cent and banks in Oman and Qatar maintained double-digit growth, the lenders in Saudi Arabia, Kuwait and Bahrain were experiencing single-digit growth rates, said the study.

The BCG index pointed out that the spread of profit growth rates was particularly wide. While the banks in the UAE enjoyed a 26 per cent profit jump and those in Kuwait saw a rise of 21 per cent, banks in Bahrain had to cope with profit decreases.

In 2014, loan-loss provisions dropped in all countries with the exception of Oman. In fact, banks in Kuwait and Qatar, which achieved high growth rates in 2013, have shown double-digit reductions in loan-loss provisioning.

Banks in the UAE and Saudi Arabia were also able to reduce in the single digits. This is the strongest reduction in LLPs since 2010.-TradeArabia News Service




Tags: UAE | Saudi | banks | GCC | growth |

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