GCC listed banks’ CAR increases to 19% in 2020 - KPMG

The GCC listed bank’s NPL ratio increased to 3.4%

An investor walks through the Dubai Financial Market in Dubai, United Arab Emirates, January 8, 2020.

An investor walks through the Dubai Financial Market in Dubai, United Arab Emirates, January 8, 2020.

REUTERS/Christopher Pike

The capital adequacy ratio (CAR) of the listed banks across the Gulf area rose to 18.7% in 2020 from 18.4% in 2019, according to a KPMG report.

Net profit meanwhile shrank to $25.4 billion last year, compared to $36.6 billion in 2019.

Total assets amounted to $2.5 trillion in 2020, up from $2.3 trillion a year earlier. Banks’ cost-to-income ratio also went up from 40.4% to 41.4% during the same time.

The GCC listed bank’s overall non-performing loans (NPL) ratio increased by 0.4% to 3.4%. “It is predicted that NPL and loan impairment will rise in 2021 as the true effects of the pandemic on businesses become clearer,” Partner and Head of Financial Services at KPMG in Kuwait, Bhavesh Gandhi, commented.

Meanwhile, Gandhi said asset growth will not likely pick up significantly from 2020, as banks adopt a more cautious approach to lending. He added that “banks are expected to proactively manage their non-performing portfolios through possible sales and write-offs.”

Given the margin pressures on banks in 2020, cost and operational efficiencies could remain a top priority for management in 2021.

“The situation might not be as bad as 2020 owing to reasons such as shrinking profit margins, slower loan growth, and rising loan provisioning,” according to KPMG.

Kamco Invest earlier said the Gulf banking sector in 2020 registered the lowest level of profitability in seven years. Another report showed that GCC banks had reduced cash dividends for last year by 45.4% or $6.6 billion due to the COVID-19 pandemic.

Source: Mubasher

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