Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
Emirates NBD Bank is the top performer among the Gulf Cooperation Council (GCC) banks in the last quarter, according to an analysis of data by S&P Global.
Emirates NBD, one of the five largest lenders by assets in the GCC region, booked a quarterly net interest income (NII) of $2.16 billion, the highest among the top GCC banks, the S&P Global report said. This was up from $1.97 billion a year earlier and $2.02 billion in the first quarter. NII is the difference between interest earned on loans and interest paid out on deposits.
Another UAE bank in the top five of the GCC region, First Abu Dhabi Bank, generated $1.34 billion in NII, rising year-over-year from $1.21 billion.
Qatar National Bank, the largest bank by assets in the region, reported an NII of $2.12 billion, up from $1.93 billion a year ago.
Saudi National Bank and compatriot Al Rajhi Banking & Investment Corp. also posted higher NII at $1.88 billion and $1.56 billion, respectively.
"The higher [NII] reflected consistent credit growth in the region coupled with elevated interest rates," said Junaid Ansari, director of investment strategy and research at Kamco Invest. NII is expected to stay high in the third quarter as interest rates are likely to be unchanged for most of the period, Ansari said.
Emirates NBD’s net income was Dh7.06 billion, which it said was the first time its quarterly net profit exceeded Dh7 billion dirhams. Al Rajhi's also grew to $1.25 billion from $1.11 billion a year ago. The growth was less pronounced at other top GCC banks.
Further into 2024, potential steep rate cuts, which look almost certain, would affect NII in the final quarter of the year, Ansari said. Yet, banks could get some cushion from continued credit growth supporting overall lending. "All countries in the GCC are serious about infrastructure investments and this should drive funding market growth," Ansari said.
The US Fed's next monetary policy meeting is in mid-September, and Chair Jerome Powell has signalled that the central bank could make its first rate cut in four years. "We're getting closer to the point at which it'll be appropriate to reduce our policy rate," the Associated Press quoted him as saying.
McKinsey recently warned in a report that the GCC banking sector's "remarkable performance" in the past year, largely thanks to high interest rates, "could foster complacency among bank managers and sap their will to implement ambitious transformation agendas."
"Executives should not assume that the current high-interest-rate environment represents a new normal for bank profitability," McKinsey said in a report in late June. "Banks should leverage the temporary gains of the present to reduce costs in the future," the consulting firm said.
