Arab banks’ assets surpass region’s GDP

Arab banks have recorded a steady growth in their assets despite the 2008 global fiscal distress to largely surpass the region’s combined gross domestic product (GDP), according to banking data.

At the end of 2010, the consolidated assets of the Arab world’s nearly 420 banks peaked at around $3 trillion, nearly 165 per cent of the estimated GDP of the 21 Arab League nations, showed the figures by the Union of Arab Bank (UAB).

The ratio was up from around 156 per cent in 2009, nearly 153 per cent in 2008 and 141 per cent in 2007, the Beirut-based UAB said in its report.

Writing in the report, UAB Chairman Adnan Yousef said most Arab banks had overcome the effects of the 2008 crisis and expected their combined net profits to increase by 10-11 per cent through 2011.

“The Arab banking sector recorded relatively strong performance in 2010 as it maintained its push out of the crisis repercussions at a time when most other global financial institutions are reeling under those effects,” he said.

His figures showed the combined assets of Arab banks grew by around four per cent in the first nine months of 2010 while there was growth of about 9.7 per cent in their deposits and 8.6 per cent in their capital to nearly $300 billion.

“Based on the banks’ results in the first half and in the third quarter of 2010, we can say they are on the right direction towards a full recovery,” he said.

“Our expectations are that their combined net earnings will grow by between 10-11 per cent in 2011 while their assets will climb to a record high of $three trillion.”

Yousef admitted that many Arab banks had been through a difficult period because of the global crisis but added that he expects all of them to become “clean” in the next few years following massive bad loan provisions.

He said Arab banks allocated more than $10 billion in provision in 2009 and the bulk of the allocations were made by banks in the Gulf Cooperation Council on the grounds they are more open to the global market.

“In terms of assets, the figures show that the UAE has been maintaining its position as the largest banking sector in the Arab world since 2006…it is followed by Saudi Arabia, Iraq, Bahrain and Egypt,” he said.

His figures also showed Lebanon recorded the highest growth in banking business of around 22.4 per cent in the region in 2009, followed by Syria with 16.2 per cent. Bahrain and Kuwait were the only members to record a decline.

In 2009, the combined loans extended by the Arab banks grew by only around 4.5 per cent compared with 31.5 per cent in 2008. Deposit growth was also affected by the crisis as it stood at around 9.3 per cent in 2009 compared with 17.6 per cent in 2008 and as high as 80 per cent in 2007.

“Shareholders equity recorded higher growth rates in 2009 as many banks sought to bolster their financial position at the expense of loans….it grew by around 22 per cent in 2009 compared with 15.5 per cent in 2008.”

According to the report, the assets of GCC banks at the end of the first half of 2010 accounted for nearly 58 per cent of the total Arab bank assets.

The UAE topped the list with assets of around $430 billion, followed by Saudi Arabia with about $367 billion, the report showed.

GCC banks were also dominated the Arab banks’ lending activity, accounting for nearly 66.4 per cent at the end of June 2010. Their deposits and shareholders equity also amounted to 58 and 74 per cent respectively.

Follow Emirates 24|7 on Google News.