Moving at Variable Speed

Moving at Variable Speed

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The GCC banking industry’s situation is extremely varied. While it is worrying in Bahrain and Kuwait, in Saudi Arabia and Qatar it is boom time once again, says Ranvir Nayar.

May 21, 2012 3:43 by kippreport

The provisioning policies of the banks have become more conservative, nudged by the regional central banks. The GCC banks do seem to be well-capitalized, with Bahrain standing at 12 percent and the UAE at 21.8 percent.

Senior Credit Officer at ratings company Moody’s, Khaled Howladar, believes banks in the region have performed reasonably well in terms of profitability. “However, many banks are still taking sizable provisions against problem loans, which are mainly driven by large restructurings at government-related issuers (GRIs),’’ he says.

The region has a very high ratio of bank assets per capita, with bank assets of $1.48 trillion for its 45 million population of residents, including expats. While it makes banks strong, it also makes the market shallow and hence more volatile, especially in times of crisis. So business cycles in the GCC are shorter and sharper.

GCC stars: Saudi Arabia and Qatar

An analysis of the banking and financial services industry of the GCC in 2012 indicates that there is quite a bit of diversity, with some nations and banks emerging in a much stronger position, while others still need to work on strengthening their institutions.

The governments in both Saudi Arabia and Qatar were prompt to step in to strengthen and aid their banks when the first signs of the Western contagion reached the GCC region.

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