Oil-rich states enjoying $70-a-barrel oil are creating new opportunities for banks, both local and foreign, and earnings are expanding at a dramatic rate.
Pre-tax profits at the 83 Middle East banks in the Top 1000 followed last year’s 39.2% increase with a further extraordinary 41.2% boost in aggregate regional profits to reach $20.3bn. Although this exceptional growth reflects the huge developments taking place in the Gulf and more such growth is expected in the years ahead, the Middle East share of the global banking pie remains relatively small.
This year, Middle East banks account for 2.9% of the Top 1000 aggregate Tier 1 capital, 1.5% of the aggregate assets and, in terms of profits, a healthy 3.2% of aggregate profits. But, while these earnings reflect the huge profits coming out of the region and produce a very acceptable aggregate return on capital of 24.5%, the combined profits of the 83 still only match 69% of Citigroup’s pre-tax profits.
This year, the structure of the Top 25 Middle East banks has taken a strategic turn. After being led by the Israeli banks, Bank Hapoalim and Bank Leumi, for many years, Saudi Arabia’s National Commercial Bank (NCB) has now moved into the top slot following a 57.1% increase in Tier 1 capital to reach $5777m and a world ranking of 109. Saudi Arabia’s Al Rajhi Banking has also shown a large 57.8% capital increase to move into third place behind NCB and Bank Hapoalim.
Saudi banks increasingly dominate the Top 25, accounting for eight banks in the listing, followed by the UAE with six banks, led by Emirates Bank International, and the three Israeli banks. From the Gulf, Kuwait and Bahrain contribute two banks each and Qatar one.
Reflecting the dynamism of the region, Al Rajhi reported a high 51.2% return on average capital. And the average of individual Saudi bank ratios hit 26.6% this year, up on last year’s 24.8%.
Kuwait, however, tops the bank profitability table with an average ratio of 27.0%. It leads Bahrain with 25.0%, the UAE with 21.1% and is significantly greater than Egyptian banks’ average return of 9.1%.
The UAE has the largest number of banks in the Middle East listing with 15, followed by Iran and Saudi Arabia, both with 10.
