Assets of top 10 Gulf banks rise 16% to $743 bn: Report

Four of the top 10 GCC bank are from Saudi Arabia and their assets have grown 10 per cent in the 12 months to end-June 2013, the report said.

Last Updated: Sep 02, 2013, 15:05 PM IST

Dubai: The top 10 banks in the Gulf Cooperation Council (GCC) are among the fastest growing globally, led by QNB Group of Qatar.

According to a Qatar National Bank's (QNB) report, the assets are likely to remain well insulated from the current turmoil in emerging markets (EM) as their growth momentum is underpinned by strong economic fundamentals in the region: High revenue from hydrocarbon exports; positive net foreign asset positions; strong support for the banking system and large government spending on infrastructure.

Four of the top 10 GCC bank are from Saudi Arabia and their assets have grown 10 per cent in the 12 months to end-June 2013, the report said.

"The growth in assets of GCC banks remains strong, notwithstanding the current EM crisis. Overall, assets of the top ten GCC banks grew by 16 per cent in one year to end?June 2013 to reach USD 743 billion. This growth was driven by strong oil prices and high non-oil economic activity," it said.

"At the same time, large-scale government spending on major projects across the region, particularly in Qatar and Saudi Arabia, created significant banking opportunities," the bank said.

According to the report, EM banks outside the GCC are facing a period of turmoil. The expected tapering of Quantitative Easing (QE) in the US has tightened global liquidity.

Cheap capital that had previously flown into EM is now reversing its course, leading to sharp exchange rate depreciations, higher interest rates, and stock market corrections.

This is having a negative impact on all aspects of EM banking sectors. GCC banks, however, have largely escaped this global liquidity crunch as the region has only limited dependency on foreign capital for its funding, the report said.

Strong hydrocarbon revenue and surplus foreign assets built up by GCC authorities provide ample resources for continued government spending on infrastructure and guarantee ongoing systemic support for the banking system.

This improves the operating environment and outlook for the banking sector and helps insulate the region from the EM crisis.

According to QNB, the leading GCC banks are therefore likely to continue their strong performance in 2013 and beyond.

Furthermore, the largest GCC banks comfortably meet capital requirements (the average Tier 1 Capital ratio amongst the top ten GCC banks is 16%); have strong asset quality (the average ratio of non-performing loans (NPLs) to total loans is 1.9% excluding Emirates NBD, which has NPLs of 14%); and robust profit growth (average profit growth was 16% in the year to end-June 2013).

QNB Group said this adds further comfort to the view that the top GCC banks are well insulated against the EM turmoil that is currently captivating global financial markets.

GCC is a group of six gulf countries which includes United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait.