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Middle East banks continue to take small steps forward

Slow but steady growth seems to be the order of the day for banks in the Middle East, with most countries in the region having something to cheer.
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Top 25: Middle East; Highest movers: Middle East; Top five ROC: Middle East

There are 92 Middle Eastern banks in 2013’s Top 1000 ranking, a marginal increase on the 91 banks that were present in 2012, but still a positive continuation of growth from the 83 banks that featured in the 2011 ranking.

Middle Eastern banks grew their Tier 1 capital by 7.88% during 2012 and today account for a 3.69% share of the global Tier 1 capital represented by the 1000 banks in the ranking.

As was the case in 2012, it is the Gulf lenders that dominate the Middle Eastern aspect of the ranking, accounting for 19 of the top 25 banks ranked by Tier 1 capital and eight of the top 10. Outside of the Gulf, it is the same six institutions – three Israeli banks, two Iranian banks and Jordan’s Arab Bank – that feature in the Middle East top 25 as featured in the equivalent 2012 ranking.

Saudi Arabia’s National Commercial Bank retains its crown as the region’s best-capitalised bank, with a Tier 1 capital of $10.2bn, representing a year-on-year increase of 11.31%. Qatar National Bank now occupies the second position in the Middle East, with a Tier 1 capital of $8.8bn, seeing it climb two places and replacing the United Arab Emirates' Emirates NBD, which now ranks seventh in the region. Israel’s Bank Hapoalim has climbed four spaces to claim third position with a Tier 1 capital of $7.7bn. 

The table showing the Middle East's fastest movers is more of a mixed picture this year. Whereas last year it was comprised entirely of Iranian, Qatari and UAE banks, this year it has broader representation from the Gulf – with UAE, Omani, Qatari and Saudi Arabian institutions all being present, as well as other Middle Eastern countries including Lebanon and Israel.

The UAE’s Abu Dhabi Islamic Bank (ADIB) ranks as the fastest mover with a 36% increase in Tier 1 capital to $3.2bn on the back of issuing the world’s first hybrid perpetual Tier 1 sukuk (Islamic bond) in November 2012 at a value of $1bn. It was the first such instrument to be publicly issued by a bank to meet the new Basel III capital requirements and raised ADIB’s Tier 1 capital ratio to 19% from 13.7%.

Iranian banks dominate the top 10 table by return on capital (ROC) – accounting for six of the banks present. However, taken on its own, this is a misleading statistic given that some of these banks have relatively low capital levels, making it easier for them to record high ROCs. For example, Parsian Bank, which ranks first in the ROC table, has a Tier 1 capital of $1.4bn, while Sina Bank, which ranks seventh and has a Tier 1 capital of just $500m. The aggregate capital assets ratio of Iranian banks in this year’s Top 1000 is 5.48%.

With aggregate pre-tax profits of $34.46bn, Middle Eastern banks account for a 4.6% share of the $749.7bn global pre-tax profits in this year’s ranking. Overall, Middle Eastern banks grew their aggregate assets by 8.78% to $2163bn and their total profits by 8.44% to $33.6bn. While this is healthy growth, it marks a slowdown from the regional banking industry’s performance in 2012, when total assets and profits grew by a respective 15.1% and 17.25%. 

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