Banks in Bahrain reported the GCC region’s biggest quarter-on-quarter (q-o-q) increase of 5.4 per cent in customer deposits to $86 billion as of end Q2 2023, shows a new report.
According to the ‘GCC Banking Sector Report – Q2 2023’ by Kuwait-based Kamco Invest, total customer deposits reported by listed GCC banks continued to show growth for the ninth consecutive quarter during Q2 2023 to reach a new record high of $2.3 trillion as compared to $2.28trn at the end of Q1 2023.
The report that analyses financials reported by 58 listed banks in the GCC for the quarter notes that the GCC banking sector saw continued growth in lending during the quarter, indicating strong economic activity and business confidence in the region.
This was despite interest rates reaching decades-high levels following rate hikes in the US.
Aggregate outstanding credit facilities in almost all the countries in the GCC showed sequential growth during Q2 mainly led by a robust projects market pipeline as well as government efforts to reduce the impact of higher interest rates.
Moreover, several new big-ticket projects and reform initiatives were announced in the GCC giving further boost to corporate lending.
Aggregate gross loans reached a new record high of $1.91trn, up 1.9pc q-o-q and 6.5pc y-o-y, mainly led by strong growth in banks in Saudi Arabia, the UAE and Bahrain.
Bahrain-listed banks saw a growth of 2.5pc in gross loans that reached $58bn.
In terms of type of banks, conventional banks once again recorded a bigger growth in lending during the quarter with a growth of 2.2pc to reach aggregate conventional loans of $1.3trn, while Islamic lending grew at almost half that pace of 1.3pc to reach $596bn.
Aggregate net income reported by banks listed in the GCC witnessed partial recovery in Q2 2023 after seeing its first decline in five quarters during Q1 2023.
Total net income reached $13.7bn with a q-o-q increase of 3.5pc supported by both higher net interest income and non-interest income during the quarter.
Higher interest rates supported net interest income during the quarter. A decline in loan loss provisions from $3bn to $2.7bn also supported bottom-line performance.
Total net interest income reached $20bn during Q2 2023 from $19.8bn in Q1 2023 but remained below the historical record high of $20.1bn recorded in Q4 2022.
Total bank revenue for GCC banks once again registered q-o-q growth during Q2-2023 by 1.3pc to reach a new record high of $29.2bn as compared to $28.8bn during Q1 2023.
Meanwhile, rising interest rates had a twin impact on banks globally. On one hand, higher interest rates affected lending, especially in the mortgage market and at the same time higher interest rates affected banks’ bond holding value resulting in failure of some banks in the US and Europe as investors became alert.
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