Consistently elevated oil prices since the start of the year was reflected in the latest customer deposit numbers during the second quarter of the year (Q2) for listed banks in the GCC, said leading Kuwait-based Kamco Invest in a new report.

The gain in oil prices came as a windfall gain for governments and companies in the upstream sector enabling most governments in the region to report their first fiscal surplus in several years, according to the “GCC Banking Sector Report Q2-2022”.

This provided additional support to the economy enabling the government to spend on new projects and was reflected in the growth in banking credit facilities during the quarter.

Aggregate q-o-q growth in customer deposits was at a four-quarter high of 4.0% to reach $2.2 trillion at the end of Q2-2022 after aggregates for all countries in the GCC reported a growth.

Saudi Arabia and UAE reported the strongest q-o-q and y-o-y growth while Qatari and Omani banks reported relatively smaller increases. Lending activity, on the other hand, remained robust during the quarter further strengthening the loan books at the end of the quarter. Aggregate gross loans reached $1.8 trillion at the end of Q2-2022, up 2.0% q-o-q and 7.4% y-o-y.

Net loans witnessed a slightly smaller q-o-q increase of 1.9% while y-o-y growth was the same at 7.4% to reach $1.7 trillion. The net impact of a bigger customer deposit growth and a slightly smaller loan growth was a steep decline of 160 bps in the aggregate loan-to-deposit ratio at the end of Q2-2022. This was one of the highest sequential decline in the ratio that reached a multi-quarter low level of 79.1%.

Total assets for the sector reached a record high level of $2.8 trillion after increasing by 2.9% during Q2-2022 as compared to Q1-2022. Both conventional and Islamic banks witnessed similar pace of asset growth during the quarter reflecting strong economic growth as seen in the PMI figures for Saudi Arabia and UAE that remained consistently and strongly above the growth mark of 50 during each month of the April-June-2022 quarter.

In terms of bottom-line performance, quarterly net income reached a record high of $11.1 billion during Q2-2022 backed by growth in all GCC countries, barring Kuwait that reported a small drop of 0.6% led by higher cost-to-income ratio. Omani banks reported the strongest q-o-q growth of 13.9% followed by Qatari and Bahraini banks with growth slightly above 3%.

The profit growth came mainly on the back of higher bank revenues further supported by a slight drop in provisions while cost-to-income ratio remained flat. Topline, on the other hand, reflected higher interest rates during the quarter with central banks across the GCC hiking rates following Fed rate hikes in the US. – TradeArabia News Service