Doha: The total bank revenue for Gulf Cooperation Council (GCC) banks registered a healthy quarter-on-quarter (Q-o-Q) growth of 4.2 percent during third quarter (Q3) of 2022 to reach $26bn as compared to $25bn in the second quarter (Q2) of the current year, according to a recent report released by Kamco Invest.
The Q-o-Q increase was led by a broad-based improvement in revenues across the GCC during the quarter. The increase was mainly led by higher interest rates across the GCC after central banks in the region hiked policy rates following the rate hikes by the US Fed.
As a result, net interest income increased by a strong 8.4 percent to reach $18.6bn. Net interest income showed growth across the board with UAE banks showing double digit growth of 12.6 percent followed by Kuwaiti and Qatari banks with q-o-q growth of 9.3 percent and 8.2 percent, respectively.
The GCC banking sector witnessed the initial positive effects of higher interest rates implemented by GCC central banks following the rate hikes in the US. Net interest income for listed banks in the GCC reached a record quarterly level at $18.6bn during Q3-2022 as compared to $17.2bn during Q2-2022. The sequential increase was broad-based and was seen across the GCC, the report noted.
It added that GCC banking sector balance sheet continued to strengthen during the quarter, although the growth rate slowed down to the lowest in six quarters. Aggregate assets reached a new record high level of $2.9 trillion after increasing by 1.2 percent during Q3-2022 as compared to Q2-2022. Conventional banks in the region witnessed a bigger total asset growth of 1.4 percent during Q3-2022, whereas growth for listed Islamic banks was slightly smaller at 0.4 percent as compared to Q2-2022.
The report stated that the healthy increase in net interest income during the quarter coupled with a relatively smaller increase in earning assets resulted in higher net interest margin (NIM) for the aggregate GCC banking sector.
NIM reached a seven-quarter high level of 2.9 percent benefitting from the recent rate hikes. Qatari banks showed the biggest improvement in NIMs during the quarter with an increase of 15 bps to reach 2.88 percent followed by UAE-listed banks with a growth of 12 bps to reach 2.76 percent. NIM continued to remain the highest in the case of Saudi Arabian banks at 3.10 percent during Q3-2022, flat as compared to Q2-2022, and it was the only market in the GCC to report NIM of over 3 percent.
Also, aggregate return on equity (RoE) for the GCC banking sector continued to show improvement during Q3-2022 reaching one of the highest levels over the last few years at 11.8 percent as compared to 11.4 percent at the end of Q2-2022.
The aggregate provision cover that GCC banks booked against stage 3 bad loans (excluding Saudi-listed banks) stood at 71 percent at the end of Q3-2022, registering q-o-q decline of 170 bps. The decline came after provision cover increased consistently over the previous four quarters from 65.2 percent in Q2-2021 to reach 72.7 percent at the end of Q2-2022.
Qatari banks boasted the highest cover against stage 3 bad loans in the GCC during the quarter at 96.6 percent, a decline from 99.2 percent cover in Q2-2022. Kuwaiti banks were next at 67.5 percent during Q3-2022, a growth from 64.7 percent during Q2-2022.
