The Gulf banking sector recorded a marginal improvement in credit extension, albeit at a slow pace, a study by SICO - a securities house offering a selective range of investment banking services on a regional basis with particular emphasis on Bahrain - showed. On the basis of statistics for the month of February as published by the central banks of Qatar, Saudi Arabia, the UAE, and Kuwait, it was shown that an increase in extended credit was registered in those countries while Bahrain reported a decline, the SICO study said. It noted that Qatari banks posted 5.1 percent month-on-month (MoM) growth in February 2010 versus 0.7 percent during the previous month, while Saudi banks had a MoM lending growth of 0.6 percent compared to 0.2 percent in January 2010. “The pace of credit growth is expected to remain weak and may take some time to recover, as the banks continue their cautious stance when it comes to lending,” the report noted. Qatari banks continued to record the highest lending growth among the GCC countries (+5.1 per cent MoM) driven primarily by public sector borrowings (+13.8 per cent MoM). Credit growth in the UAE (0.2 percent) and Kuwait (0.1 percent) was negligible while Bahrain witnessed a decline of 1.7 percent. On a year-on-year (YoY) basis, the Qatari banking sector outperformed other GCC countries by a wide margin in terms of credit expansion. Qatari banks displayed a YoY credit growth of 26.1 per cent, while Kuwait, the UAE, and Saudi Arabia witnessed a growth of 4.8 percent, 2.6 percent, and 0.6 percent, respectively. Bahrain had a 0.7 percent decline YoY. The report cited Saudi Arabian Monetary Agency (Sama) data which showed that banks' non-statutory deposits with the central bank continued to decline (12 percent MoM) in February to SR86 billion, which “we view favorably from a lending growth perspective.” The banks' foreign assets, which contracted 10.9 percent MoM in January 2010, increased in February by nine per cent (MoM) to SR204.2 billion. Sama February data indicates that Saudi banks posted a monthly profit of SR2.3 billion compared to a profit of SR2.9 billion in January 2010. On a YoY basis, monthly profits declined 6.9 percent versus a decline of 20.2 percent in January 2010. Banks' specific and general provisions continued to rise in the UAE (+1.3 percent MoM) to AED46.4 billion and Qatar (+1.7 percent MoM) to QR2.8 billion (AED2.82 billion). On a MoM basis, total banking assets increased during February, for Kuwait by 1.6 percent, Saudi Arabia 1.4 percent, Qatar 0.6 percent, the UAE 0.2 percent and remained flat for Bahrain. Qatar displayed the highest assets growth (+20.3 percent) on a YoY basis followed by Kuwait (+3.5 per cent), Saudi Arabia (+3.4 percent), and the UAE (+3.3 percent). Qatar continued to lead the GCC in terms of deposits growth (+4.5 percent MoM) followed by Kuwait (+1.7 percent MoM), and Saudi Arabia (+0.4 percent MoM) while the UAE and Bahrain saw a MoM decline of -1 percent and -0.4 percent respectively.
