The Gulf region's banking sector has witnessed robust growth for 2021 with the GCC-listed banks posting a 35.8% increase in its net profit which surged to $34.5 billion from $25.4 billion in 2020, led by the growth surge in loan book, reduction in the costs of funds, according to leading advisory firm KPMG.
Regionwise, Kuwait topped the list with a 91.4% growth in the net profits of GCC-listed banks in the country which surged to $2.9 billion from 2020’s figure of $1.52 billion, stated KPMG in the seventh edition of its GCC listed banks’ results report titled ‘A new reality’ which analyzes and compares the financial outcomes and key performance indicators for the leading listed commercial banks to the previous year.
Total assets in Kuwait grew from $301.6 billion in 2020 to $320.7 billion in 2021, climbing by about 6.3%.
This report provides banking industry leaders with succinct analysis along with insights and forward-looking views and also highlights some of the major financial trends identified in the banking sector across the region.
Speaking on the overall trends in the GCC banking sector, Bhavesh Gandhi, Head of Financial Services, KPMG in Kuwait, said: "In the last two years, the banking sector has witnessed cautious growth as banks focused on embracing technology and reducing costs. This strategy turned out to be the correct one, as the sector has gone through unprecedented growth and profits exceeded expectations this year."
"The banks within the GCC continue to accelerate digital investments, providing a digital-first approach to the customers and partnering with various fintech firms to make banking more accessible to all," he stated.
Moreover, the listed bank share prices also witnessed a 36.6% rise, while the total assets, return on equity (RoE) and return on assets (RoA) grew by 6.4%, 2.8% and 0.3%, respectively.
The banking sector in the region also saw an increase in the capital adequacy ratio (CAR) to a sector average of 19% and a reduction in the cost-to-income ratio by 0.3%, he added.
According to Gandhi, Kuwait remained on top in terms of net profit by average and RoE and had the second-best RoA after Saudi Arabia in the GCC region.
He pointed out that Kuwait International Bank and Warba Bank were among the top-performing banks with respect to net profit, recording a y-o-y growth rate of 1,081% and 181%, respectively, while Al Ahli Bank of Kuwait had an 18% y-o-y growth rate in terms of RoE — the second highest in the GCC.
"From a dip of more than 50% in the total net profit in 2020 to a profit growth of nearly 92% in 2021, banks have witnessed a V-shape recovery in Kuwait," stated Gandhi.
The sector continues to be well capitalized with the average CAR at 18.3%, which is comfortably higher than the requirements of the Central Bank of Kuwait. Furthermore, the rising interest rate environment and effective NPL management is likely to help drive profitability and growth. With the economic recovery, supported by higher oil prices, the Kuwaiti banks can expect to see strong growth in credit, especially in the infrastructure and related sectors," he added.-TradeArabia News Service
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