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Moving at Variable Speed

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

Now, nearly three years on, banks in Qatar and Saudi Arabia have managed to sort out their NPA levels and they are back to reporting rather healthy figures.

While UAE banks lead the asset score with 31 percent of the total GDP assets in the GCC countries, Saudi Arabia is next with 28 percent. It is the Qatari banks which have been the surprise performers of the region. In 2010, the country’s banks over­took those of Kuwait to stand fourth in the GCC by assets, and now they are poised to displace Bahrain and take third spot.

“In Saudi Arabia, the banks have been generally more conservative than their peers in the region. The system is funded predomi­nantly through local deposits, and the banks are able to operate with healthy profitabil­ity metrics. Additionally, the banks have healthy liquidity profile, their asset quality is visibly better than their peers and their regulatory capital ratios are very high. We expect Saudi banks to continue to operate with strong metrics in 2012, says Timucin Engin, associate director of ratings agency, Standard & Poor’s.

The net external position of the Saudi banking system is positive, meaning banks are fund providers rather than borrowers in the international market, which reduces their vulnerability to a potential impact of the re­trenchment of European banks,’’ he says.

Engin says similar to 2011, the credit growth in Saudi is expected to remain healthy. Qatar is the highest growing market in the GCC. In 2011, the credit growth was approximately 28 percent.


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