The bustling Bank Street in Doha.
DUBAI: After weathering the global financial crisis and local debt restructurings in the last few years, Gulf banks are expanding their regional footprint and venturing into business lines previously targeted only by their global rivals.
A slowdown in regional banking activity, coupled with large restructurings of state-owned entities, stymied profits around the turn of the decade as banks set aside billions of dollars to meet loan losses and restrained their lending appetite.
However, backed by a recovery in their home economies and strong capital positions, the banks are now drawing up regional growth plans and gaining share in businesses such as debt advisory services, private banking and brokerage activities, areas previously dominated by Western banks.
The crisis left Gulf banks with an opening, as some Western banks downsized regional operations to focus on repairing balance sheets back home and meet stricter capital and liquidity standards being imposed globally under the Basel III regulatory regime — a much easier task for cash-rich Gulf lenders.
“The key players are still here big time, but even they have different issues and are looking at where do they consolidate in certain areas, so that has given an opportunity for the local banks,” Rick Pudner, chief executive of Dubai’s Emirates NBD , told the Reuters Middle East Investment Summit. Several major regional lenders expect profits to rise by around 20 percent or more this year as state spending on infrastructure and social welfare bolsters their balance sheets, and as they obtain higher fee income from new revenue streams.
Barwa Bank, a Shariah-compliant Qatari lender, posted an 85 percent leap in net profit for the first half of 2013 and expects fast growth to continue, driven mainly by billions of dollars worth of infrastructure building in Qatar and growth in debt advisory and asset management business.
“We have invested heavily in our markets capabilities, in fixed income, Sukuk origination activity in the Islamic capital markets, foreign exchange and market activities generally,” Chief Executive Steve Troop said.
The bank helped arrange a $1 billion five-year sukuk for multilateral lender Islamic Development Bank this year.
Meanwhile, net profit growth at commercial banks in the UAE is expected to accelerate to about 20 percent in 2013, the chairman of the UAE’s banking federation said in September.
Even smaller names such as National Bank of Fujairah (NBF) are benefiting from economic growth in the UAE; the bank may open trade finance offices in Africa after setting up a financial advisory business in Dubai’s tax-free financial zone this year.
Reuters
