FAB reported the biggest absolute growth in profits in the GCC that reached $783.7 million in Q2-2021 as compared to $674 million n Q1-2021. Image Credit: Clint Egbert/Gulf News

Dubai: UAE banks reported the biggest increase in profits during the second quarter of 2021, registering 11.8 per cent quarter-on-quarter, according to Kamco Invest. The second quarter data showed nine out of 16 listed banks in the UAE showing increases.

FAB reported the biggest absolute growth in profits to $783.7 million in the second quarter, compared to $674 million in first quarter. ADCB and Dubai Islamic Bank followed in terms of absolute profit growth, with 25.1 per cent and 19.3 per cent, respectively. On the other hand, Bank of Sharjah continued to report a loss, reaching $93.9 million between April to end June.

Kuwaiti banks reported the second-biggest quarter-on-quarter increase in net profits at 7.8 per cent to $0.7 billion in the second quarter. CBK and Burgan Bank reported the biggest quarter-on-quarter growth in net profits.

GCC bank profits

For the GCC banking sector as a whole, net profits remained stable during Q2-2021 after witnessing a strong recovery during Q1-2021 to reach pre-COVID levels.


Aggregate customer deposits increased by 4.6 per cent

Profits reached $8.3 billion during the quarter, up 82.8 per cent year-on-year. In terms of quarter-on-quarter growth, Bahrain and Saudi Arabia reported declines in profits. The decline in Saudi Arabia mainly reflected the merger of NCB and Samba, which resulted in consolidated financials starting from the second quarter and with a gap in financials for Samba in the first.

Balance-sheet trends

Total banking sector assets  set a new record of $2.64 trillion, registering a growth of 6.7 per cent year-on-year during the second quarter. Listed banks continued to post robust growth in lending. Aggregate gross loans at the end of the second quarter reached $1.68 trillion, up 4.6 per cent sequentially and 7.1 per cent year-on-year. Faster economic activity was evident in the PMI figures for UAE and Saudi Arabia that remained elevated during May and June, well above the growth mark of 50.

Customer deposits also showed growth to reach $2 trillion, a new  high for the GCC banking sector, as compared to $1.9 trillion at the end of first quarter. Saudi Arabian banks reported the biggest sequential growth in customer deposits. The aggregate loan-to-deposit ratio improved slightly quarter-on-quarter by 20 bps to 80.4 per cent, the highest in the last five quarters, but still below pre-COVID-19 levels.

Asset quality

Loan loss provisions (LLP) showed mixed trends, but the aggregate for the GCC banks increased 12.3 per cent quarter-on-quarter to $4.1 billion as compared to $3.6 billion during first quarter. The increase was led by Saudi Arabia as LLPs almost doubled to $1.2 billion from $0.6 billion in the first three months. The increase was from provisions reported by Saudi National Bank (SNB) post its merger with Samba Financial Group.

Qatar and Bahrain also reported marginal absolute increases in provisions, whereas UAE, Kuwaiti and Omani banks reported a quarter-on-quarter decline.

Cost efficiency
GCC banks continued to report significant improvement in cost efficiency, with cost-to-income ratio seeing a significant drop.

Aggregate ratio at the GCC level declined to 40.2 per cent at the end of second quarter vs. 43 per cent for the first. Aggregates for Saudi Arabia, Qatar, Bahrain and Oman showed a quarter-on-quarter decline, whereas Kuwait and UAE banks reported a marginal increase.