MANAMA: Aggregate net interest margins (NIM) for the GCC banking sector continued to slide during Q3-2020 reaching one of the lowest recorded quarterly levels at 2.98 per cent.
Analysis released yesterday by Kuwait-based Kamco Invest shows the decline was led by low-interest rates in the region and globally coupled with a consistent growth in net loans for the GCC banking sector.
NIM declined in all the GCC markets during the quarter, barring Bahrain, where data is inconsistent as Q1-2020 financials have not been released by Bahraini banks.
The blended cost of fund for the region stood at 1.9pc at the end of Q3-2020 as against 2.5pc in Q3-19, highlighting the rate cuts implemented during H1-2020.
Net profit for the sector bottomed in Q2-2020 and witnessed a strong revival in Q3-2020 growing by 56.5pc quarter-on-quarter (QoQ) to $7.5 billion, although it continues to remain well below pre-Covid-19 levels.
The growth was mainly led by a fall in provisions during the quarter as well as savings on cost of fund.
An increase in non-interest income also contributed to the growth in quarterly profits.
In terms of the balance sheet, GCC banks continued to show resilient asset growth during Q3-2020 with a sequential growth of 2.2pc to reach a new record high of $2.53 trillion as compared to $2.47trn at the end of Q2-2020.
In terms of year-on-year (YoY) growth, total assets increased by 9.9pc during Q3-2020.
Asset growth was positive across the board both in terms of QoQ and YoY changes.
Asset growth during the quarter was once again supported mainly by Islamic banks that grew assets at 2.6pc QoQ during Q3-2020 as compared to 2.1pc for conventional banks.
In terms of YoY growth, Islamic banks once again showed higher asset growth of 13.8pc as compared to 8.7pc growth for conventional banks.
Meanwhile, Q3-2020 growth in earning assets was slightly below the growth in total assets at 1.4pc to $2.09trn at the end of Q3-2020 as compared to $2.06trn at the end of Q2-2020.
Banks reported continued growth in lending with both gross loans and net loans showing sequential growth during Q3-2020.
Loan loss provisions (LLP) declined during Q3-2020 from the record high levels of Q2-2020 to $4.4 billion as compared to $5bn during Q2-2020.
In terms of YoY trends, the aggregate increase in provisions stood at 50pc that was led by double digit growth in provisions recorded by banks in all the GCC countries.
Total bank revenue for listed banks in the GCC (excluding Bahraini banks) reached $19.6bn during Q3-2020 as compared to $18.8bn during Q2-2020, a QoQ increase of 4.1pc.
Net profit for the GCC banking sector recovered during Q3-2020 but remained well below historical levels.
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