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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.

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May 21, 2012 3:43 by



Voyanos of Booz & Co says that another problem with Kuwait, which is impacting its banking and financial services industry, is the ongoing political instability. “The frequent government changes and new par­liament elections hurt the implementation of infrastructure projects with long gesta­tion periods, such as railways, roads, hos­pitals, education etc. As a result, we have a situation where the government has enor­mous surpluses, but no investment is taking place. And except for a bank like the National Bank of Kuwait (NBK), other banks don’t have any real growth prospects,’’ he says.

 

Lessons learnt?

But have the banks in the region learnt any lessons from the excesses of the past? Booz & Co’s Vayanos says banks in the GCC definitely have learnt their lessons. “They have improved their management systems, levels of vigilance, liquidity management and also improved corporate governance. Today, the board of directors is much more proactive in holding bank management accountable. They have re­alized that no one is too big to fail. But on the flip side, the regulators need to be more vigilant on NBFCs in Kuwait and Saudi Arabia,’’ says Vayanos.

Moody’s Howladar believes it was and still is the loan exposures to Dubai GRIs (government-related issuers) that caused the biggest impairments for the banks. “We believe lenders are now much more care­ful in terms of assuming government sup­port for their commercial enterprises will be forthcoming,” he says.

Howladar believes banks need to clean up their books and bring NPAs under con­trol before moving on to agressive business development. “The uncertainty of these ex­posures (NPAs) is weighing down the profit­ability of affected banks. Until they clean up their books, it’s difficult to make a forward-looking assessment,’’ he told TRENDS.

Moody’s believes consolidation would be helpful for a very fragmented banking sector across the GCC, but given the high government ownership stakes in the banks – such decisions are likely to be more political rather than economically driven.

 



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