Gulf banks post solid Q3 earnings
Dubai, October 21, 2008
Gulf Arab bank profits have emerged relatively unscathed in the third quarter despite a global financial crisis but analysts expect a bumpy ride in the final three months.
The latest banks to post results on Tuesday, National Bank of Abu Dhabi and First Gulf Bank, saw profits rise 13 percent and 68 percent respectively.
That strong showing was in contrast to weaker results from some Saudi banks last week, battering their share prices.
"Operationally, (banks) have been fairly sound. We've seen quite good numbers, fees and commissions have held up pretty well, on top of which we haven't seen an increase in provisioning so far," said analyst Raj Madha at EFG-Hermes.
"But trading losses and downward revaluations have been significantly greater than we might have hoped, presumably because the links to the equity market and bond market have been a little bit more direct than we expected."
Earlier this month, Egyptian investment bank EFG-Hermes said it expected third quarter results of Emirates NBD to be "poor" on potential losses from equity and corporate debt investment portfolios.
Emirates NBD is slated to release its results on Wednesday.
In Saudi Arabia, Samba Financial Group blamed its 7.5 percent drop in third-quarter profits on a decline in brokerage fees. Meanwhile, al-Rajhi Bank, the Gulf's biggest Islamic lender, posted higher quarterly profits but year-to-year growth was well below second-quarter levels after a slowdown in both lending and banking services.
Last week, two major Gulf Arab banks, Bahrain's Ahli United Bank and National Bank of Kuwait, posted a surprise drop in profits, with one citing a fall in investments in regional markets.
Several other Gulf banks have seen solid earnings growth -- Banque Saudi Fransi profits rose 11.6 percent while Commercial Bank of Kuwait saw a 10 percent jump -- but the mixed results suggest the boom times may be slowing, throwing fourth quarter profit growth into question.
"It'll be an interesting quarter," said Eric Swats, partner at Rasmala Investments. "It's still very early to tell ... but things to note will be that cost of funds will be rising and those more exposed to the interbank market will have a more difficult time (as well as) those banks that have larger trading books." - Reuters