MANAMA: Bahrain’s banking sector maintained year-on-year growth last year with 6.4 per cent growth in net profit and 5.6pc growth in total assets, finds a new report.
Titled Shifting Horizons, the report by professional services firm KPMG analysed the published results of listed banks across the region for the year ended December 2017.
It summarises banks’ results against selected key performance indicators for last year and compares them with the same information for the year ended December 2016.
Speaking about the findings, KPMG in Bahrain partner and head of financial services Jalil Al Aali said overall it was a good year for listed banks in Bahrain despite economic and political challenges facing the region.
“The positive report findings reflect the resilience of Bahrain’s banking sector. Impairment charges, non-performing ratios and funding costs have all increased, while liquidity continues to be a key focus area. Banks are therefore reshaping strategies, targeting higher quality domestic assets and looking at diversified funding sources,” he added.
Looking to the future, Mr Al Aali said, “There has been an increasing focus on financial technology in that past few years. We expect this focus will continue to grow as banks in Bahrain look to improve their customer experience and competitiveness through innovation and technology.”
According to him, this would also improve efficiency, given the funding cost pressures being faced, as well as the increasing regulatory requirements, such as Basel III and IFRS 9.
“We expect to see continued focus on controlling cost to ensure profitable growth remains and cost-to-income ratios are maintained at low levels,” he added.
The introduction of value-added tax (VAT), as expected in Bahrain by the end of this year, said the analyst, means that banks need to make infrastructure investments to ensure readiness to comply with indirect tax regulatory compliance requirements.
“VAT also presents cash management and working capital funding opportunities for banks to fund businesses whose procurements are subject to incremental VAT costs and cash flows,” Mr Al Aali added.
The report findings highlight that the GCC banking sector remains relatively resilient amidst regional and global political and economic challenges, although they have not seen the double-digit growth rates seen in previous years.
Overall, net profits have increased year-on-year by 6.7pc, in comparison to last year’s decline, as a result of larger GCC economies.
The region’s banking sector continues to focus on cost reductions and operating efficiency initiatives, largely driven by innovation and technology, as evidenced by declining cost-to-income ratios.