RIYADH: Profits from lending activities at Gulf Cooperation Council banks reached a record $21.5 billion in the second quarter of 2024, marking a 7.6 percent increase from the same period last year, according to a recent report.
On a quarterly basis, the region experienced a 0.91 percent rise in net interest income, rebounding from a decline in the first quarter, thanks to growth in four of the six GCC countries, as reported by Kamco Invest’s latest GCC Banking Sector report.
Kuwaiti banks led this growth, with net interest income increasing 6.3 percent to $2.5 billion. Saudi financial institutions followed with a 2.5 percent rise, reaching $7.3 billion. Banks in Oman and the UAE also saw gains, up 2.3 percent and 1.5 percent, respectively.
Conversely, Qatari financial institutions faced a notable decline, with net interest income falling 4.3 percent to $3.3 billion compared to the first quarter of 2024.
“The quarter saw one of the highest total interest incomes at $52.2 billion, with a credit yield averaging 4.3 percent. This aligns with the trend observed over the last four quarters. A relatively modest increase in interest expenses—from $29.3 billion in the first quarter to $30.7 billion in the second quarter—contributed to the overall growth in net interest income,” the report stated.
Kuwait’s performance
Kuwait’s strong position in net interest income for the second quarter was driven by several factors, including a 1.1 percent increase in outstanding credit facilities, the highest growth in seven quarters, which boosted lending activity and interest earnings.
Customer deposits in Kuwait also grew by 1.7 percent to $302.5 billion, enhancing liquidity for lending and investment. The country also recorded the largest growth in total bank revenues among GCC nations, rising 3.4 percent to $3.4 billion, further solidifying its robust financial position.
Saudi banks
Saudi Arabia’s banking sector saw a 3.1 percent increase in outstanding credit facilities for the same period, indicating strong lending activity. However, this was offset by a 0.5 percent decline in customer deposits, mainly due to a drop in deposits at Saudi National Bank. Banks in the Kingdom also faced a 7.5 percent rise in expenses, which likely impacted overall profitability despite the growth in lending.
Revenue and profits
Aggregate net profits for GCC-listed financial institutions reached $14.8 billion in the second quarter of 2024, up from $14.4 billion in the previous quarter, reflecting a quarter-on-quarter growth of 2.6 percent. Year on year, profits increased by 9.2 percent compared to the same period in 2023.
“The primary boost to the sector’s bottom line came from a significant decline in quarterly impairments. Total loan loss provisions (impairments) fell to the lowest level in at least 33 quarters at $1.9 billion, reflecting double-digit quarter-on-quarter declines in most GCC countries,” the report noted.
This decline in impairments signals an improving economic environment and better credit quality, evidenced by a steadily decreasing non-performing loan rate over recent years. Non-interest income saw a minor decline, falling to a three-quarter low of $10.1 billion. Despite this, total bank revenues for the quarter reached $31.6 billion, marking a marginal 0.4 percent growth quarter-on-quarter.
Lending activity in the region continued to rise despite higher borrowing costs, with central bank data showing quarterly lending growth across all GCC countries. UAE banks led the region with a 3.4 percent increase in gross loan growth, followed by Saudi banks with a 3.1 percent rise.
Customer deposits for GCC-listed banks experienced a slight decline of 0.5 percent during the quarter, primarily due to a decrease in deposits at Saudi National Bank and the delisting of Bahrain’s Al Baraka Banking Group. These declines were partially offset by growth in customer deposits reported by banks in Kuwait, Oman, and Qatar.
Source: Arab News
