KPMG has released a report analyzing the results of the UAE’s top 10 listed commercial banks for the first six months of 2020. Titled GCC listed banks results – Six months ended 30 June 2020,it analyzes the published results of 54 listed banks in the GCC for H1 2020, against key performance indicators.
It covers financial institutions across countries including the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the Kingdom of Saudi Arabia, and the United Arab Emirates. It shares information on trends in the GCC on credit loss provisions reported by banks and a summary of significant regulatory support provided in each GCC country.
The report notes that in the wake of Covid-19, H1’20 profits of the top 10 listed UAE banks declined on an average by 38.9%. This was mainly attributable to higher-than-expected credit losses on loans and advances,which increased by 125.8% on an average,compared to the previous year. The quality of credit exposures has also deteriorated, resulting in an increase in the non-performing loan ratio from 3.8% on 31 December, 2019, to 4.1% on 30 June 2020, for the UAE’s top banks.
Abbas Basrai, Partner and Head of Financial Services at KPMG Lower Gulf, commented: “KPMG’s analysis shows that the UAE banking sector has remained resilient, despite a challenging operating environment and a drop in net profits from the top 10 listed banks. Stakeholders’ focusis shifting towards stability, solvency, and liquidity. It remains to be seen whether this will trigger another wave of mergers and acquisitions in the region’s banking sector.”
To mitigate the impact of the pandemic, the report notes that Central Bank of the UAE (CBUAE) announced a broad range of support measures, including a USD 70 billion stimulus package, welcome during a time when banks are facing an unprecedented demand for greater liquidity.
The effect of Covid-19 and the consequent lockdowns by governments has impacted several sectors globally and the banking industry is no exception. The drop in global interest rates in response to Covid-19 and a low oil price environment has resulted in banks facing two simultaneous economic challenges.
GCC governments and central banks also announced various economic support measures including payment holidays for borrowers and targeted liquidity support for banks. To maintain stability in the sector during unprecedented times, some regulators have also provided specific relief from capital norms and certain accounting guidelines.
The report can be downloaded here: https://assets.kpmg/content/dam/kpmg/kw/pdf/insights/2020/09/GCC-listed-bank-results-h1-2020.pdf