GCC BANKING

©Gulf Business

For as long as people have existed, banking has existed, even in its most non-descript form. Prior to the first currencies being minted, merchants granting grain loans to farmers and traders transporting goods through vari- ous cities were touted as the first prototypes of banks. The first proper bank too was no more than a series of vaults for people to

store valuables in. Since then, banking worldwide has gradu- ated from bullions in a vault to a plethora of financial products and offerings for consumers and corporate entities, nurtured and propelled by ingenuity, innovation and digitalisation.

GCC’s banking landscape

The GCC’s banking landscape is as diverse as it is sheer. On the heels of regulatory reforms, customer-centric approaches, consolidation, technological investments and omnichannel approaches, the regional ecosystem in recent years has exploded. There are more than 70 listed banks across six GCC countries; Qatar National Bank remains the biggest lender in the GCC by assets – which total $262bn – followed by the UAE’s First Abu Dhabi Bank ($227bn), according to data published by Bloomberg in July.

In recent years, the Gulf’s banking sector has shown resil- ience, recording formidable growth in terms of assets and profitability, despite political and economic headwinds.

GCC banks recorded an increase of 16.9 per cent in net profits in 2019, totaling $36.5bn, while total assets went up by 12.8 per cent to $2.3 trillion, a KPMG report, summarising the perfor- mance of select 55 GCC-based listed banks for the year-ended December 31, 2019, revealed. Meanwhile, bank share prices trended upwards with an average increase of 9.5 per cent over 2019, it found.

Islamic banks in the GCC have also maintained sound asset- quality and hold encouraging profitability indicators, funding profiles, and capitalisation. The 2019 Islamic Banking Index by Emirates Islamic bank, which polled more than 900 respond- ents with a UAE bank account and a minimum monthly income of Dhs5,000, revealed that 60 per cent had at least one Shari’a- compliant product, up from 55 per cent in 2018. Meanwhile, non-Muslim respondents’ interest in Islamic products also grew since 2018, including a 9 per cent increase in Islamic current accounts, and a 6 per cent hike in Islamic savings accounts.

“The UAE headed into 2020 with renewed confidence. How- ever, the twin effects of the Covid-19 pandemic, leading to the postponement of Expo 2020 and the collapse of crude oil prices have caused substantial economic disruption in the UAE and across the oil-rich Gulf,” says Matthew Escritt, part- ner, Banking at Pinsent Masons Middle East.

“As the region moves beyond the acute phase of the crisis and takes tentative steps to reopen, it is clear that the region’s banks will be front and centre in that recovery. Strong capital buffers together with recent consolidation in the sector have meant that the UAE’s banks are better placed than financial institutions elsewhere to come through this crisis.”

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