GCC-listed firms aggregate net profits fell 6.2% to $57.9 billion in Q2-2023, compared to $61.7 billion in Q1-2023, mainly led by a fall in energy and commodity prices, said Kamco Invest, a regional non-banking financial powerhouse.

 

The y-o-y performance showed a steeper decline of 26.6% when compared to Q2-2022 profits of $78.8 billion, which was one of the biggest profits on record for the GCC markets. 

 

Energy, Materials and Capital Goods were the top three sectors by absolute y-o-y profit decline vs. Q2-2022 as these sectors accounted for 58% of total profits during Q2-2023 as compared to 73.8% of profits during Q2-2022. 

 

Retail and Capital Goods 

A fall in profits for the Retail and Capital Goods sectors also added to the decline while profits for the Utilities sector was affected by higher financing costs as declared by the two biggest players in the sector. On the other hand, Banking sector profits remained resilient registering healthy q-o-q and y-oy growth as lending grew unabated despite higher interest rates. The Telecom sector also showed higher y-o-y profits as did Real Estate and F&B sectors during Q2-2023.

 

In terms of q-o-q performance, the decline in profit was led by a fall in profits for the Energy, Capital Goods and Real Estate sectors that was partially offset by a higher profits mainly for the Utilities, F&B and Banking sectors.

 

In terms of regional trend, profits mostly declined in the region with five out of seven country averages showing a y-o-y fall in profits. Saudi Arabia and Qatari companies showed the biggest declines during Q2-2023 while growth in Dubai and Kuwaiti aggregates partially offset the overall decline. Profits for Saudi-listed companies fell to an eight-quarter low level during the quarter. 

 

In terms of sectoral performance, profits for the Energy sector witnessed a steep y-o-y decline of 37.0% or by $18.1 billion and 14.5% q-o-q or by $5.2 billion during Q2-2023 to reach $30.9 billion.

 

Oil prices

The decline in profits reflected both a decline in volumes as well as price realisations by companies in the sector. During the quarter, average Brent crude oil prices declined by almost a third to reach $78.0 per barrel from $113.8 per barrel during Q2-2022. 

 

On the other hand, the broader commodity index as reported by Bloomberg showed that average index levels declined by 20% y-o-y during Q2-2023 while end of quarter index dropped by around 15%. The q-o-q performance of the two benchmarks (Brent crude oil prices and Bloomberg Commodity index) also showed a decline that was reflected in the earnings for the Energy sector.

 

Within the Energy sector, net profits for Saudi Aramco declined for the fourth consecutive quarter during Q2-2023, replicating the four straight quarter decline in crude oil prices. Profits for the oil major declined by 37.3% y-o-y and by 7.2% q-o-q to reach $29.0 billion. The decline in net profits was led by fall in prices as well as lower margins for the company’s refining and chemicals business.

 

On the other hand, the banking sector in the GCC continued to show growth in net profits led by higher net interest income and non-interest income. Net interest income got support from decades high interest rates prevailing in the GCC as well as globally after the US Fed started raising rates to contain inflation. 

 

Net interest margins

This was also reflected in the net interest margin that stood at a multi-quarter high level of 3.2%. Total net income reached $13.5 billion with a q-o-q increase of 2.2% and y-o-y increase of 22.6% during Q2-2023. A decline in loan loss provisions from $3.0 billion to $2.7 billion also supported bottom-line performance. 

 

Results were supported by higher aggregate outstanding credit facilities in almost all the countries in the GCC during the quarter mainly led by a robust projects market pipeline as well as government efforts to reduce the impact of higher interest rates. Aggregate gross loans for GCC-listed banks reached a new record high of $1.9 trillion at the end of Q2- 2023. The q-o-q growth stood at 1.9% or $36.3 billion backed by growth in all markets in the GCC. 

 

Corporate earnings for companies listed on Boursa Kuwait surged 33.7% y-o-y during Q2-2023 to reach $2.24 billion as compared to $1.67 billion in Q2-2022. The biggest impact on higher aggregate profits came from the Banking sector which showed 54.2% growth that reached $1.42 billion in Q2-2023 from $920.9 million in Q2-2022.

 

KSA companies

Aggregate net profits for Saudi Arabian listed companies witnessed a steep decline of 35.3% to reach $38.6 billion in Q2 -2023 against $59.6 billion in Q2-2022. Among the top sectors of the exchange, the Banking and the Telecom sectors reported an increase in profitability during the quarter. 

 

Total Q2-2023 net profits for Bahrain-listed companies decreased by 58% y-o-y to $413.2 million after four of its key sectors posted a drop in net profits during the quarter. The Materials sector reported the biggest Q2-2023 decline in profits among the sectors in the exchange. 

 

Total net profits for listed companies in Oman declined by 3.5% y-o-y to $491.5 million in Q2-2023 compared with $509.3 million in the corresponding quarter in 2022. Total Q2-2023 earnings of the Banking Sector, the biggest sector in the exchange by market cap, dropped by 7.2% to reach $256.7 million down from $276.5 million in Q2-2022. 

 

Qatari firms

Total earnings for Qatari-listed companies witnessed a decline of 18.2% during Q2-2023 to reach $3.2 billion as compared to $3.9 billion in Q2-2022. The decline in quarterly profits was primarily led by fall in profits mainly for the Capital Goods, Banks and Materials sectors that was partially offset by growth in profits by Energy, Utilities and Telecommunication Services sectors during the quarter. 

 

Listed companies in Abu Dhabi witnessed a 3.4% y-o-y dip in total net profits during Q2-2023 to reach $8.0 billion as compared to $8.2 billion during Q2-2022. The Banking sector in Abu Dhabi witnessed an increase in net profits with aggregate sector profit of $2.3 billion as compared to $1.6 billion during Q2-2022, a y-o-y rise of $643.9 million or 39.8%. 

 

Net profits for Dubai-listed companies increased by 28.6% y-o-y to $5.0 billion in Q2-2023 against $3.9 billion in Q2-2022.

 

Earnings growth during the quarter were mainly driven by Banks, Transportation and Telecom companies with the three sectors accounting for 65% of the aggregate earnings in the exchange during the quarter.-- TradeArabia News Service