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As MENA banks report profit increases, EY report brings more cheer

Aside from optimism that the global economic environment will improve, technological developments have also contributed to the region's banks' year-over-year growth

Egypt-based Faisal Islamic Bank, a financial institution that offers banking and investment services as per the Islamic Sharia principles, reported a 51.4% surge in its net profit for the first nine months of 2023.

Net profit amounted to EGP 3.427 billion in the period from January to September of this year, up from EGP 2.294 billion in the similar period in 2022.

Also, the bank’s total business volume increased by 0.9% to EGP 174.032 billion at the end of September 2023, from EGP 172.441 billion in September 2022.

Total assets inched up by 0.8% YoY to EGP 170.953 billion by September, compared to EGP 169.587 billion in the same month in 2022.

Shifting the focus to Qatar, the Qatar Islamic Bank reported its nine-month 2023 net profit of 3.05 billion riyals (USD 839 billion), up by 7% over the same period in 2022.

While the bank’s total income for the period was up 24% at QAR 8.096 billion, its total assets stood at QAR 187 billion, up by 1.5% compared to December 2022 (with a 1.7% growth in the same period). As per the bank, its financing and investing activities led to a boost in the latest asset growth.

Similar good news emerged from Kuwait too, where the National Bank of Kuwait (NBK), the Gulf country’s largest lender, posted a net profit attributable to owners of 155.8 million dinars (USD 503.5 million) in Q3 2023, up by 14% from the same period in 2022 due to higher operating income, which was, as per the market filing, was partly offset by higher operating expenses and higher impairment charges.

In a regulatory statement on the Kuwait stock exchange, NBK said that its operating revenue for the Q3 2023 period was KWD 297.9 million versus KWD 271 million from the same timeline in 2022.

EY Brings More Good News

Meanwhile, a recent analysis found that banks in the Middle East and North Africa (MENA) region saw an increase in their profits in the first half of 2023 thanks to strong financial conditions, loan demand, government spending, and a positive outlook for oil and gas prices.

According to EY, net assets and returns on equity increased by 12.2% and 6.18% on a year-over-year basis, while net profits increased by 30% across MENA banks during the first half of the year.

Additionally, the operating income, net interest margin, and total deposits all increased by 0.2%, 18.8%, and 6.08%, respectively. The loan-to-deposit ratio (LDR) increased by 5.43%.

According to the EY analysis, the MENA region’s total banking market is anticipated to reach USD 2.8 trillion by 2023 end and is on track to grow at one of the fastest rates in the world, with a compound annual growth rate (CAGR) of 9.8% from 2020 to 2023. With more than 70% of the market this year, the UAE, Saudi Arabia, Qatar, Kuwait, and Egypt are in a dominant position.

Impetus For Growth

Aside from optimism that the global economic environment will improve, technological developments have also contributed to the region’s banks’ year-over-year growth.

The GCC banks, which have undergone a “fundamental transformation” and are on a “growth trajectory,” are playing “an increasingly important role” in the broader economic expansion in the MENA area, the research stated.

Strong oil prices and the ensuing boost in non-oil activities have improved the outlook for the GCC region, which has also supported the region’s credit demand.

“Rich fiscal conditions, government investments, an anticipated improvement in the global economic environment, and technological advancements are other prominent trends dominating the banking sector,” the EY study stated further.

According to EY, banks in the MENA region will continue to expand in the future, in large part due to rising demand for banking services and the expansion of digital banking.

Basel IV and other regulatory changes are anticipated to have a positive effect on the industry.

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