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The Gulf Cooperation Council (GCC) banking sector had a good year in 2014, with net profit for the sector growing by 14 per cent, compared to 10 per cent the previous year. This came on the back of sound growth in the region in 2014, with income levels remaining very high, and consistency in government investment and infrastructure projects. GCC economies also benefited through their currencies being tied to the US dollar.
The vast majority of GCC banks remain solidly capitalised with comfortable levels of liquidity - helped by growing customer deposits - and good profitability. Loan asset quality for the sector improved further in 2014 through a fall in non-performing loans and an increase in provision coverage. Most banks now carry a low level of bad loans but maintain high loan loss provision coverage, while provisioning charges for loans and investments declined in 2014. Overall, Gulf banks have recovered well over the past few years and, the larger ones in particular continue to look for growth opportunities, both regionally and further abroad.
Loan book growth continues to remain strong across GCC markets.
Loan demand in Qatar remains robust with momentum led by an increase in public sector spending backed by several developmental initiatives taken by the government. Economic growth and large capital investments, particularly in the infrastructure, SME and manufacturing sectors, continue to be growth drivers for the loan portfolios of Saudi banks. With the market opening up for foreign investors, sentiment has increased and is likely to attract more infrastructure investment going forward. Loan margins in the region have, however, come under some pressure due to a
fall in the yield on assets.
The UAE banking sector, meanwhile, had another good year. Although 2014 GDP growth was revised down to 4.5 per cent from 5.0 per cent due to the fall in the oil price, the non-oil sector saw stronger growth. Oil production was flat on average in 2014, lower than the two per cent increase in output forecast earlier in the year. Non-oil sector growth was robust, on the back of strong output and new order growth, reflecting improved domestic and external demand. Dubai saw continued growth in tourism and hospitality, boosting trade, transport and associated services as well as a...