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Listed banks in the GCC’s revenues dipped 1.9% q-o-q to USD 31.4 bn in 1Q 2024, marking the first drop since 2021, according to the GCC Banking Sector Report Q1 2024 (pdf) by Kamco Invest. The decline came on the back of a quarterly drop in net interest income and non-interest income, the Kuwait-based investment said, highlighting the impact of surging interest rates on banks’ topline performance. Despite total interest income hitting a record high in 1Q 2024 to USD 50.5 bn, the higher interest expenses estimated at USD 29.3 bn “more than offset the growth in interest income.” Non-interest income also declined 4.7% for the first time in six quarters to report USD 10.2 bn in 1Q 2024.
Loans, loans, loans: Despite higher borrowing costs, data by central banks in the GCC showed higher q-o-q lending across the GCC with Saudi topping the list with 10.7% lending growth y-o-y, the report showed. Listed banks reported record-high gross loans and net loans at the end of 1Q 2024. Outstanding credit facilities in Saudi saw the fastest q-o-q growth in six quarters to SAR 2.7 tn on the back of growth in most industries. These include real estate, construction, and mining — all playing a pivotal role in the Kingdom’s diversification efforts.
Total customer deposits at the banks also remained robust to report a new high of USD 2.45 tn in 1Q 2024, according to the report. Saudi-listed banks came in third place with total customer deposits of USD 767.5 bn during the quarter.
Bottom-line performance for listed banks remained strong with 10.5% y-o-y growth to USD 14.4 bn, the report showed. The growth in bottomline despite lower revenues came on the back of total loan loss provisions reaching a five-year low at USD 2.4 bn, and a drop in operating expenses.
Other pundits agree: S&P Global said in a report earlier this month that the monetary tightening cycle by the US Federal Reserve has served banks in the Gulf, where central banks mirror rates due to their currencies being pegged to the USD. It sees the profitability of GCC banks on track to remain robust this year thanks to the US Federal Reserve delaying interest rate cuts. Cutting rates by 100 basis points would trim rated Gulf banks’ net income by c. 9%, according to S&P.
