Higher oil prices – extending above $130 a barrel as The Banker went to press – have improved the prospects of most Middle East banks as well as profits for calendar 2007.

Although some may have thought that profits should have been even higher, the aggregate pre-tax profits of the 97 banks from the region in the Top 1000 increased by 7.9% to $28.6bn from $26.5bn in last year’s listing.

This more modest increase was partially explained by the aggregate net income of the Saudi Arabian banks, which account for eight of the Top 25 banks in the region, falling 14.4% in 2007 to $8.1bn, as banks returned to more normal conditions following the exceptional trading and brokerage income of 2006.

While the 97 Middle East banks combined only produce profits a little higher than those of HSBC Holdings and are still relatively small, they are expanding rapidly as a result of increased oil wealth and new institutions being crea­ted, especially Islamic banks. The Top 1000 shows that aggregate Tier 1 capital rose by 26.4% to $145.7bn following a 38.6% rise the previous year, and aggregate total assets rose a similar 27.7% to $1622.2bn following a 30.8% increase the previous year.

As with last year, Saudi Arabia’s National Commercial Bank leads the Top 25 regional table with a 23.2% increase in capital to $7.9bn. Saudi Arabian banks dominate the Top 25 with eight banks, including NCB and Al Rajhi in third place. Israeli banks Hapoalim and Leumi retain top places with the United Arab Emirates (UAE) providing seven banks on the list, led by newly merged megabank Emirates NBD.

Gulf banks dominate the Top 25, accounting for 20 banks. The remaining five come from Israel, including Jordan’s Arab Bank (sixth) and new entrant Commercial Bank of Syria (24th), which has provided current figures after a long absence.

Analysing performance across the Middle East banks in the Top 1000, the Egyptians maintained the highest return on capital but at a lower rate than the previous year, dropping to 25.09% from 29.71%.

The Kuwaiti banks were close behind in terms of profitability, at 25.07%, followed by the Saudi banks at 20.72%, down from 29.22%, and the UAE banks at 18.63%.

In terms of average capital/asset ratios, the UAE banks again headed the field with 15.95%, ahead of Bahrain (14.8%) and Saudi Arabia (14.6%).

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