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Gulf banks emerge as Middle East returns to health

As the Middle East increases its representation in the Top 1000 World Bank ranking after a drop in 2011, it is the the Gulf banks that are leading the revival.
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Middle East

There are 91 Middle Eastern banks in this year’s Top 1000 ranking – a welcome reversal of the decline in their presence to 83 in last year’s table (compared to 90 in the preceding year).

The year 2010 had proven to be a difficult one for growth in the Middle East given regional banks’ preoccupation with several big debt restructurings, most notably the $24.9bn Dubai World debacle and defaults by some Saudi business conglomerates. However, the regional banking industry experienced a resurgence in 2011 with the total aggregate assets of the banks in the ranking growing by 15.1% to $2168bn while total profits increased by 17.25% to $32.7bn. Globally speaking, the region accounts for 3.72% of the total Tier 1 capital for the 1000 banks in The Banker's overall ranking.

The leading Middle East bank in the ranking is Saudi Arabia’s National Commercial Bank (NCB) in 116th position, and it is the Gulf countries whose lenders dominate the ranking – accounting for 19 of the top 25 regional banks ranked by Tier 1 capital. Outside of the Gulf Co-operation Council countries, three Israeli banks, two Iranian banks and Jordan’s Arab Bank account for the remaining six institutions.

Leading Gulf institutions are noticeably plugging the gaps left by the retrenchment of Western banks from the Middle East, which is helping them to grow their balance sheets. This helps explain why there are seven new Gulf entrants in The Banker's Top 1000 World Bank ranking for 2012, compared to just two the previous year. The United Arab Emirates accounts for three of them, Qatar for two and Kuwait and Saudi Arabia with one each.      

Once again, NCB and the UAE’s Emirates NBD retained their titles as the region’s first and second most well-capitalised banks, with a respective Tier 1 capital of $9.1bn and $7.8bn. This represents year-on-year increases of 10.08% and 4.39%.

Iranian banks also deserve a special mention for comprising four of the 10 positions in the 10 highest movers table this year. Bank Pasargad takes the number one spot as the fastest mover, having recorded a 148% increase in Tier 1 capital after climbing from position 471 in last year’s overall ranking to position 266 this year. The bank’s 47% growth in assets to $18bn helped prompt this capital increase. Fellow Iranian lender Saman Bank is the second highest mover with a 60.7% increase, while Bank Maskan and Karafarin Bank occupy the seventh and ninth positions, respectively.

In third position in the highest movers table, Qatar National Bank also stands out – posting a 58.55% rise in Tier 1 capital to $7.4bn. This growth can largely be explained by the need to increase its capital in line with its assets, which grew from $61.2bn in 2010 to $82.7bn in 2011. In May 2011, the bank completed a rights issue amounting to $3.49bn which was fully subscribed, while its issued capital grew from $1.07bn to $1.73bn over the year. The capital increase was aimed at ensuring the bank can comply with Basel III and to enable it to expand its geographical operations as well as explore merger and acquisition opportunities. 

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