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 kippreport
Total lending by the 51 banks, both local and foreign, increased by approximately 4 percent in 2011, as against a drop of 1.3 percent in 2010.
Relatively large sector and borrower lending concentrations, high exposure to real estate and construction, and uncertainty surrounding exposure to some government-related entities (GREs) are also weighing on their credit profiles.
Engin says that, similar to 2011, the credit growth for 2012 for the banking system is expected to be limited, given the existing challenges of banks in terms of funding and asset quality. The UAE remains “a tale of two cities”, where the Abu Dhabi institutions display healthier asset quality metrics than their peers in Dubai.
The UAE banking system, as a whole, has a CAR ratio of above 21 percent as of the end of 2011 (significantly above the 12 percent requirement) and the composition of the capital is predominantly Tier 1. This is an important strength for the UAE banking system.
Engin goes on to say that the UAE banks’ exposure to GREs (government related entities) remains large. Additionally, there is a high level of restructured exposures in the system and the future performance of these exposures will drive the asset quality profile of the banks for the next several quarters.
Bahrain: Offshore banking goes bust
Of all the GCC nations, it is clearly Bahrain that has been hit the hardest and is the country that could take the longest to recover from the crisis.