Banks in Middle East back on double digit growth path

DUBAI: The banking industry in the Middle East continued to register a double digit growth, expanding 10.7 per cent in 2013, according to a report.
The profits during the period registered an increase of 10.3 per cent, it said, adding at an aggregate level, provisions for bad loans grew slightly by 2.5 per cent.
According to the study by Boston Consulting Group (BCG), increases in operating costs exceeded revenue growth significantly by 13.9 per cent in 2013.
“The main customer segments retail and corporate banking, however, remain significantly behind the overall revenue growth rate with 7.2 per cent and 6.9 per cent respectively. The difference is attributable to growth in international business including acquisitions of banks as well as in treasury,” it said.
Reinhold Leichtfuss, Senior Partner & MD in BCG’s Dubai office and leader of BCG’s Financial Institutions practice in the Middle East, said there were significant gaps in the development of banks.
“We observe that the gaps between banks’ developments are widening: While about 10 to 15 banks achieve double digit growth rates both in revenues and in profits, 3 to 10 banks had to accept negative growth in revenues or profits overall or in customer segments,” he said.
The performance of Middle East banks clearly exceeded that of their international counterparts, a number of which experienced further revenue declines in 2013, the report said.
Based on the banks’ 2013 annual results released in the first quarter of 2014, 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.
The index covers the largest banks in Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and in the UAE.
“The 2013 BCG index includes 35 banks from across the GCC, capturing nearly 80 per cent of the total regional banking sector,” Reinhold Leichtfuss said.
While revenues of banks in Qatar grew by 20 per cent and banks in the UAE are back to double digit growth overall, Saudi, Omani and Bahraini banks are experiencing single digit growth rates, the report added.
In 2013, loan loss provisions varied significantly in countries. In particular, banks in Qatar and Kuwait had to build higher provisions due to increasing delinquencies.
The UAE and Saudi banks by and large repeated the provision levels of 2012 of 3.3 and 1.7 billion dollars respectively during the period, said the report.