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Banks in the Middle East and North Africa (MENA) region saw their earnings surge in the first half of the year, underpinned by strong fiscal conditions, credit demand and government investments, and a positive outlook for oil and gas prices, according to a new report.
Net profits across MENA banks went up by 30% during the first six months of the year compared to a year earlier, while net assets and returns on equity jumped by 12.2% and 6.18% year-on-year, according to EY.
Other indicators were also positive, with the net interest margin, operating income and total deposits rising by 0.2%, 18.8% and 6.08%, respectively. Loan-to-deposit ratio (LDR) rose by 5.43%.
MENA BANKS' PERFORMANCE HIGHLIGHTS (H1 2023)
EY’s report noted that the total banking market in the MENA region is forecast to hit $2.8 trillion this year and is poised to be one of the fastest-growing markets in the world, with a compound annual growth rate (CAGR) of 9.8% from 2020 to 2023. The UAE, Saudi Arabia, Qatar, Kuwait and Egypt account for more than 70% of the total market this year.
Factors behind growth
The year-on-year growth experienced by banks in the region has also been driven by technological advancements, as well as expectations that the global economic landscape will improve.
Playing “an increasingly important role” in the overall economic growth in the MENA region are GCC banks, which have gone through a “fundamental transformation” and are on a “growth trajectory”, the report noted.
“The outlook for the GCC region has been strengthened by strong oil prices and the related improvement in non-oil activity, which has also supported the credit demand in the region.”
“Other prominent trends dominating the banking sector include robust fiscal condition, government investments, an anticipated improvement in the global economic landscape and technological advancements.”
In the future, EY said, banks across MENA will continue to grow and this will be largely driven by the growing demand for banking services and the growth of digital banking.
“Regulatory reforms such as the introduction of Basel IV, are expected to have a positive impact on the sector.”
(Writing by Cleofe Maceda; editing by Seban Scaria)
