nation Gulf Cooperation Council (GCC) banks are forecast to perform better this year because of high public spending and an increase in lending, the National Bank of Kuwait (NBK) said Wednesday. "For banks in the Gulf Cooperation Council (GCC) countries, 2011 was a better year than the one before. Bank profits continued to improve and assets growth was healthy," the report said said. "In the current global context, the region's economic growth is relatively good, with governments at various stages of implementing ambitious capital spending plans to boost economic growth and funding is plentiful….however, some regional banks continued to deal with the after-effects of the 2008 global financial crisis, particularly on their asset quality," it said. The report, citing banks balance sheets, showed asset growth in the region lost steam in 2011 despite higher earnings. Most banks in the region have recovered from the 2008 global fiscal distress and regional debt default problems but their 2011 income remains below peak levels recorded before the crisis. "As for 2012, we expect to see the recovery in bank performance continue through the year with the overall trends intact. Project spending will continue to be the key driver for banking activity for all markets," it said. "Banks' consumer lending will also contribute to an improved performance, fuelled by salary increases and employment. Meanwhile, asset quality issues will remain a problem for many banks in Kuwait and Dubai, though provisioning levels will decline gradually." Return on equity (ROE) averaged 12.2 percent, just barely higher than its level in 2010 and a far cry from the 19 percent seen in 2007. "However, the aggregate figures for the region hide a more divided environment. Saudi Arabia, Qatar, Abu Dhabi and Oman have all seen a generally more positive picture…….credit growth was healthy and asset quality issues were largely behind them. In these markets, profitability bounced back and lending grew at a double-digit pace." Bank performance in Kuwait, Bahrain and Dubai was less upbeat, NBK said, adding that while there were some differences among them and certainly individual bank results varied, the markets generally witnessed poorer credit growth and profits continued to be held back by asset quality issues. Banks in markets seeing more robust private sector growth and substantial public sector investment saw more rosy 2011.