ME's most valuable bank brands

11 February 2013
Qatar National Bank has emerged as the Middle East's most valuable brand in the global financial services sector.

The Banker magazine's annual list of the world's most valuable banks saw the Qatari bank extend its lead over regional rivals.

"In the Middle East, the four top rated banks held their places in the table - QNB, Al-Rajhi, National Bank of Abu Dhabi and Emirates NBD - but only QNB was able to increase its brand value, from $12.6 billion to $13.1 billion," The Banker said in its editorial.

The survey is conducted by brand valuation consultancy Brand Finance, which calculates a bank's financial revenue data, compares it to its peers and pores over each bank's five-year forecast period (2013 to 2017) based on three sources: the Institutional Brokers Estimate System, historic company growth and gross domestic product growth of the bank's country of origin.

QNB, which is Qatar's largest bank in terms of market capitalisation and assets, reflects the country's sovereign strength and the opportunities that lie ahead.

"[Qatar's] rapid loan growth has been well above the average in the region," affirms Fitch Ratings in a recent note. "It has been more or less matched by deposit growth (to a large extent public sector), but loans/deposits ratios are gradually creeping up. A further downside to rapid growth is that concentration risk may increase sharply - although risk is mitigated by government backing for the largest corporates and the major infrastructure projects in Qatar."

UAE's First Gulf Bank, Kuwait Finance House, NBK Capital and Samba Financial Group were also among the top ten most valuable banks in the Middle East.

"UAE banks remain profitable, despite weaker asset quality, slow loan growth and recent regulations. Core earnings have benefited from lower funding costs," Fitch Ratings said.

Middle East banks have more than doubled their brand valuation in five years, from USD73 billion in 2007 to USD184-billion by 2013.

The UAE had 9 banks represented in the survey with a combined brand value of USD44 billion, while Saudi Arabia had seven banks collectively valued at USD34-billion.

However, not every Middle East bank fared well in the survey. While QNB led the region, its Shariah-compliant counterpart Qatar Islamic Bank slid the most in brand value, falling 155 places in rankings.

Saudi Arabia's Arab Bank fell 117 places, Morocco's Attijariwafa Bank fell 114 rungs and Bahraini's Ahli United Bank also declined 111 places.

Regional banks have been capitalising on the problems facing international banks. Qatar National Bank and Emirates NBD recently bought Egyptian operations of two European banks.

"Banks in the Gulf have capital to spare, and are literally capitalizing on their traditional strengths such as strong capital positions, healthy liquidity, and supportive shareholders to pursue acquisitions in MENA emerging-market countries, where opportunities for long-term growth exist," said Standard & Poor's credit analyst Timucin Engin in a note.

The Banker list echoes a recent report by other reputed banking periodicals.

Middle East banks also dominated a Global Finance list of "50 safest emerging market banks," with twenty-two entries.

National Bank of Abu Dhabi was ranked as the third safest emerging market bank, while National Bank of Kuwait, Qatar National Bank and samba Financial Group were also in the top 10.

The outlook for Gulf banks going forward looks strong, especially after weathering the global financial crisis with strong government support.

"Margins have been under pressure due to low interest rates and subdued volume growth. However, rising fee income, lower impairment charges and cost control should lead to a gradual improvement in profitability," said Philip Smith, an analyst at Fitch.

Fitch expects loan growth in the Gulf is set to increase in 2013, as confidence improves and infrastructure projects come on line.

Globally, the United States' Well Fargo beat British bank HSBC to become the world's most valuable financial institution.

"Wells Fargo's achievement demonstrates the improved standing of US banks as they recover from the financial crisis and forge ahead," The Banker said in its report.

Meanwhile, HSBC's decline mirrors the wider reputational troubles facing the British financial services industry. Many British banks including HSBC, Standard Chartered, Royal Bank of Scotland and Barclays Bank have been stung by scandals and poor governance issues, and it has reflected in the survey.

Overall, global bank brands have performed well with total brand value rising 15% from USD746.8 billion in 2012 to USD860.7 billion this year, a new high and substantially better than the $855 billion garnered in 2011, The Banker said.

"In 2007 the brand value to market cap percentage of the US banks in the top 100 was 12% and has been rising ever since, though not in a straight line, to reach 15% in 2013," wrote Brand Finance chief executive David Haigh.

"The brand value over the same period has been much more constant, in the USD160 billion to USD200 billion range, with the exception of 2009 during the worst of the crisis. This suggests that markets have moved from overvaluing US banks to undervaluing them."

© 2013


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