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Kamco Invest: Gulf banking sector’s profitability increased by 40% in 2021

Gulf banking sector

Riyadh, (Business News Report)|| The profits of the Gulf banking sector jumped by 40% during the past year 2021, to reach $35 billion, compared to $25 billion in the year 2020, a report by Kamco Invest said.

Despite the noticeable rise, the profitability of Gulf banking sector remained below pre-pandemic levels of $37 billion in 2019.

Kamco Invest explained that the increase was wide-ranging on an annual basis during the year 2021 across the Gulf Cooperation Council countries, as the profits of Kuwaiti banks nearly doubled during the year to reach $2.9 billion.

The listed Saudi and UAE banks also recorded a good growth in profits by 40.2% and 52.6% during the year 2021.

As a result, the total return on equity for the banking sector reached its highest level in seven quarterly periods, at 10.4% at the end of 2021, compared to 9.6% in the third quarter of 2021 and 8.1% at the end of 2020.

Profit growth during the year was driven by an increase in gross profit in addition to a decrease in loan loss provisions.

Total bank revenues increased by 6.9% to reach $90.0 billion during the year 2021, which is among the highest rates ever, mainly due to the growth of non-interest net income by 17.6% and the growth of net interest income by a relatively lower rate of 2.3%.

Revenue growth was broad across the GCC, with Qatari banks reporting the highest growth rate of 9.9%, followed by the UAE and Kuwait with growth of 9% and 7.1%, respectively.

Listed banks in the UAE recorded the largest growth in non-interest income by 31.7%, but it was the only market that witnessed a decrease in interest income during the year by 3.2%.

Provisions for loan losses announced by Gulf Cooperation Council banks decreased by more than a quarter in 2021, to reach $14.9 billion, compared to $20.4 billion in 2020.

According to Kamco, the allocations remained high compared to pre-pandemic levels, reaching an average of $9.1 billion during the ten years preceding the pandemic (2010-2019).

The decrease in provisions for loan losses in the year 2021 included all the countries of the Gulf Cooperation Council except for Qatar, which recorded a growth of 20.1%, or the equivalent of $0.6 billion.

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