Top 50 GCC Banks 2017

Economic growth across the GCC region weakened last year as governments’ revenues fell. This in turn negatively impacted the commercial and corporate sectors while consumer confidence and spending weakened. As a result, the GCC banking sector recorded lower returns in 2016, particularly due to increased provisioning and impairment charges as loan asset quality remained under pressure.

As a result of tighter liquidity, banks issued more debt in 2016 and this is continuing in 2017. Another option used by many banks has been to tap the international syndicated loan market to refinance maturing debt. Many investors (notably in Asia, but also in the US and Europe, where interest rates are low) have been willing to increase their exposure to GCC sovereigns and banks, due to high credit ratings and good yields. This is set to continue.

Basel III implications for liquidity are significant for most GCC banks as there is a large maturity mismatch between medium-term lending and short-term customer deposits. Some banks have started to issue longer-tenor debt to reduce this mismatch.

Overall, GCC banks’ financial fundamentals remain sound. Bank capital ratios are solid and a number of banks issued new Tier 1 and Tier 2 type capital securities in 2016 as part of the Basel III framework.