August 28, 2021 | banking

GCC banks report record high loans growth in Q2


Listed banks in the GCC recorded aggregate gross loans at $1.68 trillion at the end of the second quarter (Q2) of the year, 4.6% quarter-on-quarter (q-o-q) and 7.1% y-o-y, after a broad-based growth seen in all the markets, a report said.

Net loans also showed a similar growth of 4.8% q-o-q to reach $1.6 trillion, once again backed by growth in all the markets, according to the “GCC Banking Sector Report Q2-2021” released by Kamco Invest, a financial powerhouse in Kuwait.

Faster economic activity was evident in the PMI figures for UAE and Saudi Arabia that remained elevated during May-2021 and June-2021, well above the growth mark of 50. Customer deposits also showed growth in almost all the markets during the quarter.

Aggregate customer deposits increased by 4.6% to reach $2.0 trillion, a new record high for the GCC banking sector, as compared to $1.9 trillion at the end of Q1-2021.

Saudi Arabian banks reported the biggest sequential growth in customer deposits while Qatari banks’ customer deposits remained almost flat with a marginal decline of 0.1%. The aggregate loan-to-deposit ratio for the sector improved slightly q-o-q by 20 bps to 80.4%, the highest in the last five quarters, but still below pre-Covid-19 levels.

Total banking sector assets in the GCC continued to show growth reaching a new record high of $2.64 trillion, registering a growth of 4.7% q-o-q and 6.7% y-o-y during Q2-2021. Growth was seen in most markets in the GCC barring Qatari banks that reported a marginal q-o-q decline of 0.5%. UAE banks continued to account for the biggest share of regional banking balance sheet with total assets of $840 billion, accounting for a third of the total banking sector assets in the region, followed by Saudi Arabian banks at $771 billion or 26.7% of the aggregate.

On the policy front, the economic resumption post the Covid-19 restrictions saw several targeted government support programs announced in the region with an aim to support vulnerable sectors as well as to provide benefits including employment support, start-up eco system and sector specific assistance programs.

Recently, Saudi Arabia and Kuwait extended the loan/instalment deferral program aimed at small businesses until the end of September-2021, while Kuwait also amended its bankruptcy law in order to support SMEs.

A new channel of banking also emerged with the grant of two digital banking licenses in Saudi Arabia. Businesses are also keen on financing new projects with the ongoing low interest rates and the expectation that the rates would remain low till the end of 2022, the report said.

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