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Middle EastSeptember 28 2010

Arab banks shrug off global pressures

A banker dealing with a phone enquiry at National Commercial Bank of Saudi Arabia, which tops The Banker's Arab banks ranking this year.
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Arab banks shrug off global pressures

Arab banks have collectively managed to boost their assets and largely maintain profits despite global difficulties in the banking industry. While a handful of institutions recorded losses, the top Arab banks report healthy profits, and capital adequacy ratios have only fallen marginally.

Despite a slight dip in average profitability, this year's ranking of the top 100 Arab banks shows a financial sector largely resilient to negative regional and global pressures. Total bank assets held by the 100 largest Arab banks increased 12.4% year on year, while average pre-tax profits of banks in this year's top 100 fell only slightly to $235m.

Healthy profits among a handful of very large banks helped boost this year's Arab ranking. Nine of the top 10 banks in the ranking increased their Tier 1 capital during 2009, and six increased their pre-tax profits. At the top of the ranking, National Commercial Bank of Saudi Arabia is one of the five Middle Eastern banks to declare pre-tax profits of more than $1bn. In its 2010 first-half results, National Commercial Bank cited lending growth as one of the main reasons for a further 18% increase in net income.

Confidence still strong

Taken as a whole, the top 100 Arab banks' return on average capital has fallen from last year's average of 18.8% to 16.6% this year, yet banks' lending confidence has not been dented. Despite weakening profitability and falling levels of capital adequacy, this year's ranking shows continued asset growth across the region as the total assets of the 100 largest banks passed the $1500bn mark.

In terms of asset growth, Lebanese banks lead the way. Six of the top 11 banks with the fastest expansion of assets are based in Beirut: Bank Audi Sal increased total assets by 29.8%; Fransabank by 28%; Lebanese Canadian Bank by 25.7%; Crédit Libanais by 23.1%; Bank of Beirut by 21.4%; and Byblos Bank by 20.9%.

Total capital growth among banks in this year's ranking has not quite kept pace with total asset growth, however, and as a result of this average Bank of International Settlement (BIS) capital adequacy ratios have fallen during 2009, albeit fractionally. Even so, banks in this year's top 100 Arab ranking have an average capital adequacy ratio that, at 17.56%, remains somewhat higher than the global average: the average BIS capital adequacy ratio of banks in this year's The Banker Top 1000 Banks ranking is 15.67%.

Star performers

Five banks in this year's Arab top 100 ranking - three of them from Saudi Arabia - made profits of more than $1bn: Al Rajhi Bank in Saudi Arabia ($1.8bn); Samba Financial Group of Saudi Arabia ($1.2bn); Qatar National Bank ($1.15bn); National Commercial Bank of Saudi Arabia ($1.1bn); and National Bank of Kuwait ($1.05bn).

Elsewhere, Rakbank in the United Arab Emirates is once again one of the stars of The Banker's Arab ranking, with pre-tax profits equal to 41.3% of average capital, giving it the highest return on capital of any bank in the ranking. Rakbank also registered the ranking's second highest return on assets at 4.3%. Egyptian banks also did well, accounting for four of the top 10 highest returns, led by Commercial International Bank, with pre-tax profits equal to 39.8% of average capital. Other highly profitable banks in this year's ranking include Oman Arab Bank (with a 33.1% pre-tax return on average capital) and Al Rajhi Bank of Saudi Arabia (with a 31.9% return). Al Rajhi Bank's $1.8bn pre-tax profit is the highest of any bank in the Arab ranking.

Qatar National Bank and Qatar Islamic Bank also had a good year. Qatar National Bank made a 31.02% return on average capital, while Qatar Islamic Bank registered a 4.6% return on assets, the highest in this year's ranking. Morocco's Attijariwafabank also made a healthy return of 30.4% on average capital.

Top 100 Arab banks aggregates

Top 100 Arab banks aggregates

Top Arab banks by tier 1 capital growth (31/12/2009)

Top Arab banks by tier 1 capital growth (31/12/2009)

Where they come from

Where they come from

Tier 1 capital (%)

Tier 1 capital (%)

Few losses

Only eight of the banks in this year's top 100 Arab ranking made a loss. Gulf International Bank of Bahrain (ranked 26) declared the ranking's largest pre-tax loss at $199m, following 2008 losses of $387m. Abu Dhabi Commercial Bank (ranked 10) suffered losses of $139m, having made a pre-tax profit of $377m the previous year. Gulf Bank (ranked 36) also suffered a significant loss of $98m in 2009.

Yet despite these losses, the total Tier 1 capital of the largest 100 Arab banks has grown from $138.2bn to $153.5bn as banks issued shares and transferred profits to retained earnings. Large increases in Tier 1 capital were reported by Lebanon's BankMed (a 44.2% rise) and several UAE banks, including Rakbank (which increased its Tier 1 by 43.5%), National Bank of Abu Dhabi (42%), Union National Bank (39.9%), First Gulf Bank (38.1%) and Emirates NBD (30.8%).

Bahrain's Al Salam Bank also deserves a special mention, having moved up 18 places in this year's ranking to 69 with a Tier 1 capital increase of 66.3% following its acquisition of Bahraini Saudi Bank.

Other rankings

Other rankings

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