For Free Headlines Submit Your Email
Wednesday, October 04, 2023 6:57 GMT
Bank lending growth in the GCC countries remained strong during the second quarter of 2023 despite interest rates reaching decades-high levels following rate hikes by the US Federal Reserve, indicating strong economic activity and business confidence in the region. Data from GCC central banks showed growth in lending activity across the region during the second quarter, although the rate of growth decelerated in several other markets. Saudi Arabia recorded the strongest quarter-on-quarter growth in outstanding credit facilities during Q2 2023 at 2.5%, while growth in Kuwait, Qatar, Bahrain, and Oman was below 1%, according to a report released by Kuwait-based Kamco Investment. ‘Aggregate outstanding credit facilities in almost all the countries in the GCC showed sequential growth during the second quarter, mainly led by a robust project market pipeline as well as government efforts to reduce the impact of higher interest rates. Moreover, several new big-ticket projects and reform initiatives were announced in the GCC, giving further boost to corporate lending,’ the report said. GCC banks continued to record strong growth in lending during the second quarter, backed by growth in all markets in the GCC. Aggregate gross loans reached a new record high of US$1.91 trillion at the end of Q2 2023, up 1.9% quarter-on-quarter and 6.5% year-on-year, mainly led by strong growth in banks in Saudi Arabia, the UAE, and Bahrain, according to Kamco Investment.Net incomes riseTotal net income of GCC banks reached US$13.7 billion in the second quarter of 2023, with a quarter-on-quarter increase of 3.5%, supported by both higher net interest income and non-interest income during the quarter. ‘Higher interest rates supported net interest income during the quarter. A decline in loan loss provisions from US$3 billion to US$2.7 billion also supported the bottom-line performance,’ Kamco Investment said. Meanwhile, rising interest rates had a twin impact on banks globally. On one hand, higher interest rates affected lending, especially in the mortgage market, and at the same time, higher interest rates affected banks’ bond holding value, resulting in the failure of some banks in the US and Europe as investors became alert. In GCC region, Saudi-listed banks once again reported the strongest quarter-on-quarter growth in lending at 2.7% to reach US$640 billion at the end of Q2 2023. Bahrain-listed banks were next with a growth of 2.5% in gross loans that reached US$58 billion, followed by UAE-listed banks with a growth of 2.1% to reach US$529 billion. Banks in Kuwait, Qatar, and Oman reported slightly smaller growth in gross loans during the second quarter. In terms of types of banks, GCC conventional banks once again recorded a bigger growth in lending during the second quarter, with a growth quarter-on-quarter of 2.2% to reach aggregate conventional loans of US$1.3 trillion, while Islamic lenders’ lending grew at almost half that pace of 1.3% to reach US$596 billion.Deposits growTotal customer deposits reported by listed GCC banks continued to show growth for the ninth consecutive quarter during Q2 2023, reaching a new record high of US$2.3 trillion compared to US$2.28 trillion at the end of Q1 2023. However, the quarter-on-quarter growth in deposits was the smallest since Q2 2021 at 1.0%, as country-level data showed mixed trends during the quarter. Bahraini banks reported the biggest quarter-on-quarter increase in customer deposits, reaching US$86 billion with an increase of 5.4%. Saudi and UAE banks were next with growth of 1.8% and 1.4%, but with much larger deposits of US$730 billion and US$715 billion at the end of Q2 2023, respectively. Qatari and Kuwaiti banks reported a decline in deposits during the quarter, contracting by 0.8% for both countries. Deposits in conventional banks in the GCC grew by 1.1% during the quarter, reaching US$1.64 trillion, while those in Islamic banks increased at a smaller rate of 0.6% to reach US$660 billion.