Aggregate net profits of GCC banks reach $14.8bn in 2024 second quarter
Muscat: Net income reported by listed banks in the GCC reached a new record high during the second quarter of 2024 after four out of the six country aggregates showed growth as compared to the first quarter of 2024, according to a new report.
“Aggregate net profits reached $14.8 billion during the quarter as compared to $14.4 billion during the previous quarter, resulting in a quarter-on-quarter (q-o-q) growth of 2.6 percent,” Kamco Invest said in its latest GCC Banking Sector Report – Q2-2024 August-2024.
“The year-on-year (y-o-y) growth was also healthy at 9.2 percent when compared to the second quarter (Q2) of 2023,” it added.
The biggest support to bottom-line performance for the sector came from a steep decline in quarterly impairments booked by banks in the region. Total loan loss provisions (impairments) reached the lowest level in at least 33 quarters at $1.9 billion reflecting double-digit q-o-q declines in most countries in the Gulf Cooperation Council (GCC).
The decline in impairments indicates improving health of the economy as well as overall credit quality. It also shows improving loan portfolios over the past several years as shown by a steadily declining non-performing loan rate.
Moreover, since central bank interest rates in the GCC remained unchanged during the quarter, net interest income reached a new peak during the quarter at $21.5 billion, a slight improvement when compared to $21.3 billion during Q1-2024. Non-interest income reported a small decline to reach a three-quarter low level of $10.1 billion during Q2-2024. As a result, aggregate bank revenue reached $31.6 billion during Q1-2024, registering a marginal q-o-q growth of 0.4 percent.
Meanwhile, lending growth continued in the region despite higher borrowing costs. Data from central banks in the GCC showed higher q-o-q lending for all the GCC country aggregates. The data on listed banks showed gross loans for UAE banks registering the strongest quarterly growth during Q2-2024 at 3.4 percent followed by Saudi Arabian banks with a slightly smaller growth of 3.1 percent. Data from central banks also highlighted a similar picture with Saudi Arabia witnessing credit growth of 3.1 percent followed by Oman, Kuwait and Qatar with quarterly growth of
around one percent.
On the other hand, customer deposits for GCC-listed banks declined by a marginal 0.5 percent during the quarter mainly led by fall in customer deposits reported by SNB as well as a decline in deposits in Bahrain after the delisting of Al Baraka Banking Group. These declines were partially offset by higher customer deposits reported by banks in Kuwait, Oman and Qatar.
Loan growth highlights resilient economic trends in the GCC
Data from GCC central banks once again highlighted the resilience of regional economies with continued growth in credit facilities. Outstanding credit facilities in the region continued to show growth during Q2-2024 led by a broad-based growth across the seven country aggregates.
The gains as compared to last year were solid with all countries witnessing healthy growth in lending. Saudi Arabia witnessed a double-digit y-o-y growth in outstanding credit facilities at 11.4 percent while banks in Qatar showed a y-o-y growth of 5.5 percent. The lending growth in the region reflected a strong project pipeline with aggregate contract awards of $51.7 billion in the GCC during Q2-2024.
Similarly, manufacturing activity data from Bloomberg (Markit Whole Economy Surveys) showed PMI figures stayed strong during the quarter above the growth mark of 50 for Dubai, Saudi Arabia, Qatar and the UAE at the end of Q2-2024.
The manufacturing activity in Saudi Arabia remained robust with PMI at 55.0 points during June-2024, a slight decline from 57 points at the end of March-2024. UAE also boasted a strong PMI figure of 54.6 points in June-2024 while Dubai showed a similar growth with a PMI of 54.3 points. Qatar has shown significant recovery over the last few months with PMI figures reaching 55.9 points, the highest in the GCC in June-2024 as compared to 50.6 points in March-2024. The PMI for Kuwait, published by S&P Global, also showed growth during June-2024 with the index at 51.6 points, although there was a decline from May-2024 when the index was at one of the highest levels at 52.4 points.
