DOHA: The provision expenses of top GCC banks declined significantly during the third quarter of 2014 (3Q,14), with Qatar taking the lead (52.8 percent year-on-year).
Qatar National Bank’s (QNB) provision expenses declined 79.9 percent YoY in 3Q,14, followed by QIB (-51.9 percent YoY) and Commercial Bank of Qatar (-42.2 percent YoY); however, Masraf Al Rayan has booked some provision during the quarter as NPL(non-performing loans) accumulation has increased, albeit marginally.
Provision expenses of GCC banks declined 26 percent YoY and 11.9 percent QoQ during 3Q14. The high decline rate of provision expenses in Qatar is followed by Kuwait (31.3 percent YoY), UAE (21.1 percent), Saudi Arabia (17.2 percent).
On contrary, provision expenses on Bank Muscat in Oman rose three fold during the quarter partially denting the growth in profitability, Global Investment House (GIH) that covered 24 leading banks in the region said in its “GCC banking” sector quarterly report..
Qatar based Doha Bank’s provisions rose 33.3 percent YoY in 3Q14; notably, the bank’s NPL also rose in 3Q14 to 3.27 percent from 2.89 percent in 3Q13, which indicates that the rise in provisions is due to addition of specific provisions.
Despite booking marginal provision expenses, asset quality of Masraf Al Rayan in Qatar still remains as one of the best amongst GIH’s Qatari coverage. Saudi Arabia-based Saudi Hollandi Bank witnessed a significant rise in provision during the quarter due to accumulation of higher general provisions. Riyad Bank’s provisions grew 55.7 percent YoY in 3Q14, which partially restricted the net profit growth; rise in provisions was due to adding general provisions.
Total assets of GCC banks under our coverage expanded 10.4 percent YoY to $1.15trn in 3Q14. Qatar-based banks witnessed the strongest growth in total assets (11.6 percent YoY), followed by banks in Kuwait (11.0 percent YoY), UAE (10.6 percent YoY) and KSA (8.9 percent YoY). Expansion in asset base was supported by growth in loan book. However, on a QoQ basis, asset growth was sluggish due to marginal increase in loans
Among the individual banks, Qatar Islamic Bank (28.6 percent YoY), Saudi Hollandi Bank (17.5 percent), Masraf Al Rayan (16.3 percent) recorded strong asset growth due to higher expansion in loan book
The collective loans disbursed by GCC banks under GIH’s coverage increased by 8.9 percent YoY to $716.3bn in 3Q14 which were the main driver behind the net interest income which grew by 7.5 percent YoY during the quarter. However, margins remained slightly under pressure on YoY basis due to 2 bps decline in the yield on assets leading to 2 bps shrinkage in NIM; though NIM increased 2 bps on QoQ basis. Loan book growth continues to remain decent across GCC markets, with banks in Qatar witnessing the highest increase of 12.8 percent YoY.
Qatar based banks maintained their loan growth momentum due to an increase in public sector spending backed by several developmental initiatives taken by the government .Among the banks in Qatar, Qatar Islamic Bank ,Masraf Al Rayan and Doha Bank registered higher growth in lending of 35.3 percent YoY, 27.0 percent YoY and 14.6 percent YoY, respectively.
The net interest income (NII) of GCC banks increased 7.5 percent YoYand 2.6 percent QoQ.The NII of banks in Kuwait grew the most (13.3 percent YoY),followed y Qatar (9.2 percent YoY), UAE (6.6 percent YoY)and KSA (4.7 percent).Among Kuwait based banks, Kuwait Finance House witnessed a strong 37.4 percent YoY growth in its net financing income due to 47bps YoY improvement in NIM.
In Qatar, Islamic banks recorded better net financing income growth due to higher financing growth. Qatar Islamic Bank and Masraf Al Rayan reported 23.7 percent YoY and 23.1 percent YoY growth in their net financing income, respectively.
The Peninsula
