A report issued by Kamco Invest said that the profitability of Gulf banks reached one of the highest levels on an annual basis in 2021, increasing by 40% to reach $35 billion, but profits remained below pre-pandemic levels of $37 billion in 2019.
The report indicated that the increase on an annual basis in 2021 was wide-ranging throughout the GCC countries, as the profits of Kuwaiti banks nearly doubled during the year to reach $2.9 billion, and the listed Saudi and Emirati banks recorded a good growth in profits by 40.2% and 52. 6% during the year.
As a result, the total return on equity for the banking sector reached its highest level in 7 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 provisions for loan losses, and total bank revenues increased by 6.9% to reach $90 billion during 2021, which is among the highest rates ever, mainly due to the growth of non-interest net income by 17.6% and net interest income growth by a relatively lower rate of 2.3%.
Revenue growth was broad across the GCC , with Qatari banks recording the highest growth rate of 9.9%, followed by the UAE and Kuwait with growth of 9% and 7.1%, respectively, and UAE-listed banks recording the largest growth in non-interest income at 31.7%, but it was the only market that saw interest income fall by 3.2% during the year.
Provisions for loan losses announced by GCC banks decreased by more than a quarter in 2021 to reach $14.9 billion, compared to $20.4 billion in 2020.
However, provisions remained high compared to pre-pandemic levels, reaching an average of $9.1 billion during the 10 years leading up to 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 percent, or the equivalent of $0.6 billion.
The KAMCO Invest report said that provisions for loan losses held by banks in the Gulf countries decreased to 14.9 billion dollars during the year 2021, compared to 20.4 billion dollars in 2020, after the provisions of all six Gulf banks declined, except for Qatar.
The decrease in provisions held by banks in the UAE was about $2.8 billion, and Kuwaiti and Saudi banks came next with a decrease in their provisions by $1.5 billion and $1.3 billion during the year.
The report stated that the total return on equity for the Gulf banking sector continued to improve during the fourth quarter of 2021, reaching its highest levels recorded in 7 quarters, reaching 10.4%, compared to 9.6% at the end of the third quarter of 2021. However, the ratio remained relatively low. compared to pre-pandemic levels. The ratio also improved significantly YoY by 230 basis points on the back of a 12-month increase in total profitability Total shareholders’ equity amounted to $353 billion.
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