Big Arab banks show strong results for 2018

Big Arab banks show strong results for 2018

Some of the bigger GCC banks have already published their full financial statements for 2018 and Arab Bank, based in Jordan, has also announced some of its financial figures for the end of the year.

The overall picture is good. We have reviewed the results of eight GCC banks that have reported (see attachment below). Seven of these are reporting higher net profits compared to 2017, six are reporting higher returns on average assets, five report higher returns on average equity and all have total capital ratios (TCRs) higher than 15%, with several showing TCRs around 20%. 

The implementation of IFRS 9 has been a significant issue for banks globally during the last year (the standard took effect from 1 January 2018) and has been depressing capital ratios as a result of higher provisioning requirements. Nonetheless, the GCC banks that we have reviewed have been able to shrug off the effect of IFRS 9 without seeing a material decline in their capital adequacy.

Oil prices are the key determinant of financial sector performance in the GCC, and they were higher in 2018 compared to 2017. The average price of the OPEC basket of crudes was $69.60/b in 2018, compared to $52.43 in 2017 and $40.76 in 2016, according to the Nicosia-based newsletter, Middle East Economic Survey. 

Arab Bank's net profits increased by more than 50%, partly due to higher operating income but primarily as a result of two large non-recurring items. The bank was able to reverse $325mn in excess legal provions following the successful conclusion of long-running legal cases brought against it in New York, but it also chose to book impairment charges of $225mn against the value of Turklandbank in which it has a 50% stake. That stake has now been classified as 'available for sale'.

 

 

GCC Big Banks results 2018