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Loan growth accelerates at GCC banks as economy recovers

28 Aug 2021

The listed banks in the GCC countries continued to post robust growth in lending activity during the second quarter of 2021, resulting in record high loan-books.

The GCC banks’ aggregate gross loans at the end of the second quarter reached US$1.68tn, up 4.6 per cent on quarter-on-quarter and 7.1 per cent on year-on-year basis, after a broad-based growth seen in all the markets, Kuwait-based Kamco Investment said in a research report.

It said net loans also showed a similar growth of 4.8 per cent quarter-on-quarter to reach US$1.6tn, once again backed by growth in all the GCC markets.

Faster economic activity was evident in the Purchasing Managers’ Index (PMI) figures for the UAE and Saudi Arabia that remained elevated during May-2021 and June-2021, well above the growth mark of 50, the report noted.

Customer deposits also showed growth in almost all the GCC markets during the second quarter of this year. 

Aggregate customer deposits increased by 4.6 per cent to reach US$2.0tn, a new record high for the GCC banking sector, as compared to US$1.9tn at the end of the first quarter of 2021, Kamco Investment said.

Saudi banks reported the biggest sequential growth in customer deposits while Qatari banks’ customer deposits remained almost flat with a marginal decline of 0.1 per cent. 

The aggregate loan-to-deposit ratio for the sector improved slightly to 80.4 per cent, the highest in the last five quarters, but still below pre-COVID-19 levels. The report said that total banking sector assets in the GCC continued to show growth reaching a new record high of US$2.64tn, registering a growth of 6.7 per cent during the second quarter of 2021 against the same period a year ago. Kamco Investment said that the UAE banks continued to account for the biggest share of regional banking balance sheet with total assets of US$840bn, accounting for a third of the total banking sector assets in the region, followed by Saudi Arabian banks at US$771bn or 26.7 per cent of the aggregate.

‘On the policy front, the economic resumption post the COVID-19 restrictions saw several targeted government support programmes announced in the region with an aim to support vulnerable sectors as well as to provide benefits including employment support, start-up ecosystem and sector specific assistance programmes,’ the report said.

‘Businesses are also keen on financing new projects with the ongoing low interest rates and the expectation that the rates would remain low till the end of 2022,’ it added.

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