According to recent research, profits from lending activities at Gulf Cooperation Council banks hit a record USD 21.5 billion in the second quarter of 2024, up 7.6% from the same time the previous year.
According to Kamco Invest’s most recent GCC Banking Sector study, the region’s net interest income increased by 0.91% every quarter, recovering from a decrease in the first quarter due to growth in four of the six GCC countries.
With a 6.3% increase in net interest income to USD 2.5 billion, Kuwaiti banks led this growth. Saudi banking institutions came next, increasing by 2.5% to reach USD 7.3 billion. Additionally, banks in the UAE and Oman witnessed increases, rising 1.5% and 2.3%, respectively.
On the other hand, compared to the first quarter of 2024, net interest income for the Qatari financial institutions decreased by 4.3% to USD 3.3 billion.
With a credit yield of 4.3% on average, the quarter saw one of the highest total interest revenues at USD 52.2 billion. This is consistent with the pattern that has been in place for the last four quarters. The study said that the total improvement in net interest income was mostly due to a very small increase in interest expenses, which went from USD 29.3 billion in the first quarter to USD 30.7 billion in the second.
Kuwait’s Accomplishments
Several factors contributed to Kuwait’s solid net interest income position in the second quarter, including the largest expansion in seven quarters, 1.1%, in existing credit facilities, which increased lending activity and interest revenues.
Kuwait’s customer deposit base increased by 1.7% to USD 302.5 billion, improving lending and investment liquidity in the process. Furthermore, bolstering its strong financial position, the nation saw the biggest increase in total bank income among GCC countries, climbing 3.4% to USD 3.4 billion.
Saudi Financial Institutions
During the same period, the banking industry in Saudi Arabia had a 3.1% growth in outstanding credit facilities, reflecting robust lending activity. A 0.5% fall in client deposits, mostly as a result of a decline in deposits at Saudi National Bank, offset this, though. In addition, bank costs in the Kingdom increased by 7.5%, which probably affected total profitability even with the increase in lending.
Income And Earnings
In the second quarter of 2024, aggregate net earnings for financial institutions listed on the Gulf Cooperation Council (GCC) increased by 2.6% from USD 14.4 billion to USD 14.8 billion. Profits rose by 9.2% on an annual basis over the same time in 2023.
The main driver of the sector’s improved profitability was a notable drop in quarterly impairments. The research stated that total loan loss provisions (impairments) decreased by double digits in the majority of the Gulf countries, reaching USD 1.9 billion, the lowest level in at least 33 quarters.
The decrease in impairments over the past few years has shown that credit quality is stronger and the non-performing loan rate has been steadily declining. There was a little decrease in non-interest income, which dropped to USD 10.1 billion, a three-quarter low. Despite this, bank revenues for the quarter came to USD 31.6 billion, indicating a little increase of 0.4% over the previous quarter.
Despite increased borrowing costs, lending activity remained high in the area; central bank data indicates that all GCC countries had quarterly lending growth. With a 3.4% increase in gross loan growth, UAE banks outperformed Saudi banks in the area, rising by 3.1%.
Throughout the quarter, customer deposits at GCC-listed banks decreased by 0.5%, mostly as a result of the delisting of Bahrain’s Al Baraka Banking Group and a drop in deposits at Saudi National Bank. Banks in Kuwait, Oman, and Qatar reported increases in consumer deposits, which somewhat countered these decreases.