UAE-listed banks once again led the GCC in terms of return on equity (RoE) at the end of the third quarter of 2024, achieving a rate of 16.8 per cent, according to recent data. The latest report from Kamco Invest on the GCC banking sector indicates that listed banks in the region experienced broad-based growth in lending during the third quarter of 2024, with healthy quarter-on-quarter growth observed across various countries in the GCC. This growth was underpinned by resilient economic expansion in the region, despite relatively lower oil prices.
The growth was primarily fueled by non-oil sectors in the UAE, Qatar, Bahrain, and Saudi Arabia. Junaid Ansari, Kamco Invest’s head of investment strategy and research, noted, “Additionally, the project market and the pipeline of prospective projects remain robust for GCC countries, reflecting their commitment to long-term growth visions as they work to diversify their economies away from crude oil dependence.”
Aggregate gross loans for GCC-listed banks rose by 3.1 per cent to reach a new record high of $2.12 trillion by the end of the third quarter of 2024, up from $2.06 trillion at the end of the previous quarter. The year-on-year growth hit double-digits at 10.1 per cent, driven by robust growth in each market. In terms of RoE, UAE banks were followed by those in Saudi Arabia and Qatar, both recording RoEs of 12.8 per cent, unchanged from the previous quarter. Oman-listed banks saw the largest year-on-year growth in RoE at 80 basis points, primarily due to elevated profits and relatively smaller growth in total shareholders’ equity.
Gross credit for the UAE banking sector increased by 0.1 per cent in July 2024 to reach Dh2.1 trillion. This increase was mainly driven by a 0.3 per cent growth in domestic credit, which more than offset the 1.5 per cent decline in foreign credit. Within domestic credit, there was a 1.2 per cent growth in credit to the government sector and a 0.7 per cent increase in credit to the private sector, which more than offset a 1.9 per cent decline in credit to government-related entities (GREs) and a 1.2 per cent decline in credit to non-banking financial companies (NBFCs).
UAE banks also reported a healthy growth in customer deposits during the quarter, reaching $828.0 billion, the highest in the GCC, with a growth of 3.1 per cent compared to Q2 2024. Global interest rate expectations have shifted significantly in recent weeks due to economic data releases indicating persistent economic trends and higher-than-expected inflation numbers. Despite elevated interest rates, especially in the US, the region’s economic growth remained resilient.
Data from GCC central banks underscored the resilience of regional economies, with continued growth in outstanding credit facilities. Credit facilities in the region continued to expand during the third quarter of 2024, led by growth in almost all countries. Saudi Arabia saw a double-digit year-on-year growth in outstanding credit facilities at 12.2 per cent, while banks in Qatar recorded a year-on-year growth of 7.4 per cent. The lending growth in the region was supported by a strong project pipeline, with aggregate contract awards of $54.2 billion in the GCC during the third quarter of 2024.
Manufacturing activity data from Bloomberg (Markit Whole Economy Surveys) showed PMI figures remained strong during the quarter, staying above the growth mark of 50 for Dubai, Saudi Arabia, Qatar, and the UAE at the end of the third quarter of 2024. Saudi Arabia’s manufacturing activity remained robust, with a PMI of 56.3 points in September 2024, the highest in three months. The UAE also recorded a strong PMI figure of 53.8 points in September 2024, while Dubai showed similar growth with a PMI of 54.1 points.
Aggregate lending by listed banks in the GCC continued to grow quarter-on-quarter during the third quarter of 2024, supported by growth in all GCC markets. Aggregate gross loans reached a new record high of $2.12 trillion after registering the strongest quarter-on-quarter growth in 13 quarters at 3.1 per cent, while the year-on-year growth stood at 10.1 per cent. Banks in Saudi Arabia reported the largest quarter-on-quarter gross loan growth in nine quarters during the third quarter of 2024, primarily driven by healthy lending across almost all sectors. Gross loans for Saudi-listed banks grew by 3.7 per cent to reach $737.4 billion during the third quarter of 2024. Omani and UAE-listed banks followed with lending growth of 3.6 per cent and 3.4 per cent, respectively.
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