Banks in Mena are expected to see minimal growth in aggregate net income for Q1 2024 compared to last year, according to CI Capital Research, with most individual banks showing positive year-on-year (YoY) earnings growth.
Saudi banks are projected to outperform their GCC peers in both earnings and loan growth. Analysts Sara Boutros and her team at CI Capital forecast the highest YoY earnings growth (+4.2 per cent) and the strongest quarter-on-quarter (QoQ) system loan growth for Saudi banks. Alinma Bank is expected to be the top performer within the largest econony in the GCC, boasting the highest YoY earnings and sequential loan growth.
On the other hand, UAE banks are likely to see earnings pressured due to the recent introduction of corporate taxes. Net interest margins (NIMs) are also expected to remain stable or even decline for most GCC banks, with some exceptions.
Al Rajhi, Alinma, BSF, Al Bilad, ADIB, DIB, and NBK are highlighted as potential outliers due to favourable asset repricing.
The report also flags negative contributions from Turkish exposures, particularly for Emirates NBD and Kuwait Finance House. Recent rapid rate hikes in Turkey are seen impacting funding costs before translating into higher asset yields.
Egyptian banks are a bright spot, with CI Capital anticipating robust earnings and balance sheet growth. Strong NIMs driven by rising interest rates are forecast to more than offset a predicted drop in fee income and increase in provisions, leading to a projected 36.8pc YoY and 30.2pc QoQ jump in Q1 earnings.
However, a slowdown in local currency lending is expected as higher policy rates dampen credit activity, despite a one-off adjustment to banks’ foreign currency books that could initially support loan and deposit growth.