12 December 2016

Up to 40 percent of Gulf banks’ deposits come from government oil revenues, an Emirates NBD analyst was quoted as saying in a report by Gulf News this week, highlighting the challenge the sector faces from low oil prices.

“Low oil prices not only reduce their deposit base but also expose them to higher funding demands from government and government related entities,” the analyst said. Read more here.

However, there was good news for bankers this week as oil prices soared by 4 percent on Monday, scoring their highest gains since 2015, after oil producers agreed over the weekend to reduce output to curb oversupply and prop up prices. Read more here.

Analysts said the outlook is likely to improve for GCC banks in 2017. “While operating conditions for banks in the GCC remain challenging, the stabilisation of oil prices — albeit at a low level — and resilient non-oil sectors will moderate pressures on the banking sector from slowing economic growth, fiscal reforms and spending cuts,” Olivier Panis, a vice-president at Moody’s, said in the Gulf News report.

Lower oil prices and slower economic growth has encouraged banking executives to be smarter in how they operate and to come up with new initiatives to boost profitability, the chairman of the UAE Banks Federation, Abdul Aziz Al Ghurair, told Zawya in October.

“In the past, we had the luxury of going wrong, because it doesn’t matter, I can absorb going wrong. I think people think smarter now than three years ago. During a difficult time great ideas come. In a great time everybody is a genius, in a bad time then the genius really comes out,” he said.

Read more here:
Squeeze in UAE bank profits will "weed out" the poor operators, says CEO of Mashreq Bank
Low oil price will bring “good things” for Arab world, says Dubai business leader Abdul Aziz Al Ghurair

© Express 2016