Listed banks in the GCC region continued their post-COVID recovery with strong double-digit asset while maintaining a conservative approach to credit provisioning, tight cost control and healthy capital levels, amid a future outlook based on cautious optimism, Omar Mahmood, Head of Financial Services, KPMG in the Middle East, South Asia, and Caspian Region and Partner, KPMG in Qatar, has said.
With banks looking to navigate through pandemic-driven difficulties toward economic recovery and stability, KPMG published the eighth edition of its GCC-listed banks’ results.
Titled ‘Cautious Optimism’, the report offers a thorough analysis of the financial results and key performance indicators (KPIs) of leading listed commercial banks in the region, in comparison with the previous year, to highlight the main financial trends in the GCC countries.
Out of all the GCC nations, KPMG said, Qatar had the lowest cost-to-income ratio (22.8 percent) and the highest coverage ratio on stage 3 loans (91.6 percent), with Qatar National Bank being the largest bank by assets in the region at $327 billion.
The following salient findings emerged from the financial results’ analysis for the year ended 31 December 2022 for the GCC region as a whole:
Profitability saw another double-digit increase of 25.3 percent, driven particularly by growth in loan books, increased interest margins, lower loan impairment and a continued focus on cost efficiencies.
Asset growth remained robust as banks increased their asset base by 9.9 percent, which was driven by lending to high-quality customers.
Net interest margins increased by 0.2 percent, as a result of the rising interest rate environment, which helped drive profit growth.
The overall NPL ratio for the GCC banking sector decreased by 0.1 percent and now stands at 3.8 percent, reflecting the conservative approach to credit risk management. Net impairment charges on loans and advances decreased by an average of 11.2 percent, with the drop observed mainly in stage 2 and 3 portfolios, indicating an improvement in credit quality.
Cost-to-income ratios reduced compared to 2021 (40.9 percent to 39.9 percent), reflecting the continued focus on cost reductions and operating efficiency initiatives.
The average coverage ratio for stage 2 and 3 loans increased by 0.4 percent and 1.7 percent respectively from the prior year, demonstrating how banks continue to be cautious in relation to their approach to provisioning.
Share prices overall remained stable year on year with a marginal increase of 0.7 percent compared with the previous year.
The report also highlighted a 1.2-percent decrease in return on equity (ROE), compared to 2021, as equity growth outpaced profitability increases. The dividend payout ratio in the region also witnessed a near-identical drop of about 1.3 percent as banks looked to safeguard their earnings to further bolster equity positions and support future growth.
According to the report, banks continued extending adequate coverage for their performing loan book as stage 1 net provision charges grew six-fold compared to 2021. Furthermore, while well above the minimum regulatory requirements across all GCC countries, the average sector capital adequacy ratio dipped marginally (0.3 percent) to reach 18.6 percent.
The GCC listed banks’ results anticipate the banking sector in the region to continue its pursuit of building on its strong foundation, aided by a robust economic environment. As banks in the region aim to look past the COVID-19 crisis, it is expected that accelerated innovation plans, technology focus and continued government investment will witness further growth in the future.Out of all the GCC countries, Qatarhad the lowestcost-to-income ratio