CI Capital Research said MENA banks under their coverage are set to see minimal change to their aggregate net income on a year-on-year (YoY) basis in Q1 2024, with approximately 72% of them set to deliver higher YoY earnings growth.

Saudi Arabian banks are set to outperform GCC peers on earnings and loan growth in Q1 2024, while UAE banks will see earnings come under pressure due to the corporate taxes, according to preview of the quarterly financial earnings by CI Capital Research.

"Among GCC peers, we expect Saudi banks to deliver the highest y-o-y earnings growth (+4.2%) as well as the highest QoQ system loan growth...," said analysts Sara Boutros and others.

The report flagged Saudi Arabia's Alinma Bank as set to deliver the highest year-on-year (YoY) earnings and sequential loan growth in the country, they added.

UAE banks should deliver lower earnings on YoY and quarter-on-quarter (QoQ) bases, pressured by the introduction of corporate taxes in Q1.

Net interest margins (NIMs) are expected to be stable to lower for most GCC banks, the report said.

"We expect names including Al Rajhi, Alinma, BSF, Al Bilad, ADIB, DIB, and NBK to be the exception to this, owing to favourable asset repricing."

The report flagged a negative contribution from Turkish exposures, specifically for Emirates NBD and Kuwait Finance House, as the rapid rate hikes since H2 2023 reflect on funding costs before reflecting positively on asset yields.

For Egyptian banks they expect robust earnings and balance sheet growth. Earnings are set to rise 36.8% YoY and 30.2% QoQ in Q1 2024, boosted by strong NIMs amid rising interest rates, more than offsetting the anticipated drop in fee income and the rise in provisions, according to the report.

"A one-off adjustment to banks’ FCY-books (foreign currency) should support loan and deposit growth; nevertheless, we expect to see a slowdown in LCY-denominated (local currency) lending as the higher policy rates weigh down on credit activity."

(Writing by Brinda Darasha; editing by Seban Scaria)