OIL PRICE DROP COULD PINCH GROWTH
Banks in the Middle East were already under pressure to manage their capital and liquidity more carefully to meet new Basel III requirements when they were hit with new worries about falling oil prices. The International Monetary Fund cautions that Arab Gulf bank portfolios are heavily concentrated in the oil sector, exposing them to greater risks, including the possibility of a broad economic slowdown.
Moody’s Investors Service says in a recent report that sustained low oil prices could result in lower government-related deposits and cause a decline in bank liquidity in the region. This could affect loan growth and profitability.
Banks in Bahrain and Oman are the most likely to be affected, Moody’s says. In most cases, however, the capital that Gulf banks have amassed in the past five years of high oil prices will cushion the immediate impact. While loan growth and profitability are likely to suffer, a material impact on asset quality is unlikely in the near term, according to Moody’s. On the bright side, lower oil prices have lessened pressure on government finances for the oil-importing countries of the region, such as Jordan and Lebanon.
Regional Winner | National Bank of Kuwait
National Bank of Kuwait has kept a close watch on asset quality, and its conservative approach to lending has paid off during a period of political turmoil in the Middle East. NBK stands to benefit from its preeminent position in its home market, as Kuwait’s non-oil growth accelerates an expected 5% to 6% this year and next. Capital spending under the government’s long-delayed development plan has finally begun to boost economic activity outside of the petroleum sector. NBK is the main financier and loan arranger for the government’s major infrastructure projects.
NBK’s long-term strategy is to maintain its leading position in Kuwait, while leveraging its well-known brand throughout the region. In the Middle East and North Africa, it has a presence in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Saudi Arabia, Turkey and the United Arab Emirates.
NBK Group posted a 10% rise in earnings in 2014, while its assets increased by 17.1%, to more than $74 billion. The bank has proved resilient throughout its transition to new management and has set clearly defined goals across a product and service range that includes corporate finance, investment and wealth management, and retail banking.
Isam Jassim Al Sager, group CEO
Bahrain | Ahli United Bank
Ahli United Bank earned a record $483 million from continuing operations in 2014, an increase of 32% from a year earlier, while operating income crossed the $1 billion mark for the first time. AUB has full banking operations in Bahrain, Kuwait, Egypt, Iraq, Oman and Libya, and it has a UK subsidiary. The bank follows a diversified business model and has been awarded a credit rating that is two notches higher than Bahrain’s sovereign rating. AUB has a conservative nonperforming-loan-coverage ratio of nearly 160%. The bank’s cross-border business has grown steadily and accounts for 20% of its total loan portfolio.
Adel El-Labban, group CEO and managing director
Egypt | Commercial International Bank
Commercial International Bank reported a 24% rise in earnings and a 30% return on average equity in 2014. Egypt’s largest private-sector bank has 161 branches and a leading market share in loans and deposits. Egypt’s stock exchange in February approved a request by CIB to increase its capital by $300 million. CIB’s corporate banking group financed key projects in the power sector last year, and its corporate loan portfolio grew by more than 14%. The treasury and capital markets group is a top profit center for CIB. The bank is also the leader in domestic and cross-border securities services.
Hisham Ezz Al-Arab, chairman and managing director
Iran | Bank Saderat Iran
Bank Saderat Iran has the largest banking network in the country, with more than 3,400 branches and an estimated $60 billion in assets. The bank also has eight branches and a regional office in the United Arab Emirates that handles trade with Iran. Lebanon is another focus of the bank’s activities: It has five branches and a regional office there. Altogether, Bank Saderat has 28 international offices in 12 countries.
Mohammad Reza Pishro, CEO
Iraq | Bank of Baghdad
Bank of Baghdad is one of the largest of the 24 commercial banks that operate in Iraq. A subsidiary of Kuwait’s Burgan Bank, Bank of Baghdad is a member of the Kipco Group, which owns 60 companies in 24 countries. Bank of Baghdad has 20 subsidiaries in Iraq that are involved in such industries as insurance, construction materials, food and clothing. It has been listed on the Iraq Stock Exchange since 2004.
Faisal Al Haimus, CEO
Israel | Bank Hapoalim
Bank Hapoalim, Israel’s largest and highest-rated bank, operates 260 retail branches, including 23 serving the Arab-Israeli sector. It led the Israeli banking industry in 2014 in terms of earnings and equity. Bank Hapoalim has a leading 34% market share in the small business segment. The bank introduced the Poalim Wallet in 2014, for mobile payments, money transfers and purchases.
Zion Kenan, president and CEO
Jordan | Arab Bank
Arab Bank maintained a strong balance sheet and a high-quality loan portfolio in 2014, and posted a 15% rise in earnings. It demonstrated the ability to manage risks successfully in the 30 countries where it operates. Arab Bank’s return on equity has improved steadily in the past few years, and the coverage ratio for nonperforming loans has grown to 160%. The bank’s diversification enables it to receive 75% of its revenue from outside of its home base. It focuses on low-risk trade finance and supplies treasury services throughout the region from its service center in Bahrain.
Nemeh Sabbagh, CEO
Kuwait | National Bank of Kuwait
National Bank of Kuwait operates 165 branches in 15 countries and has long been the market leader in Kuwait, where it accounts for more than half of the banking industry’s profits. NBK is building its strength in Islamic banking with its 58.4% stake in Kuwait-based Boubyan Bank. With a focus on customer satisfaction, NBK has expanded to nine countries in the Middle East and North Africa. It is among the highest-rated banks in the region, with a conservative management and a record of sustainable growth.
Isam Jassim Al Sager, group CEO
Lebanon | Bank Audi
Bank Audi is the largest and highest-rated bank in Lebanon. Its operations in 12 external countries contributed 42% of earnings in 2014. Odea Bank in Turkey, the first foreign bank licensed there in 12 years, contributed to Bank Audi’s 15% growth in earnings. The bank has nearly reached its goal of balanced activity between Lebanon and abroad. In September 2014, Bank Audi completed a $300 million capital increase by way of a rights offering and a $60 million purchase of shares by the International Finance Corporation.
Samir Hanna, group CEO
Oman | BankMuscat
BankMuscat complements its network of 139 branches with the largest network of e-channels in Oman. The bank is the leading provider of corporate and investment banking services in the country. Its asset-management division is the sultanate’s biggest wealth manager. In a little over two years, BankMuscat’s Meethaq Islamic banking unit has become the leader in the industry in Oman. BankMuscat had a 7.3% increase in earnings last year and a capital adequacy ratio of 15.9%
AbdulRazak Ali Issa, CEO
Palestine | Bank of Palestine
Bank of Palestine, the largest Palestinian bank, has 54 branches in the West Bank and Gaza. Its profits were flat last year, but its assets rose 3.27% to $2.4 billion, and its nonperforming loan ratio remained low at 2.21%. The bank has a market share of some 23% of deposits and loans in Palestine and more than 600,000 customers. Its PalPay (Palestinian payments) subsidiary was active last year, increasing transactions by 26%.
Hashim Shawa, chairman and general manager
Qatar | Qatar National Bank
Qatar National Bank is the biggest bank in Qatar, with about 45% of banking sector assets. It is 50% owned by the Qatar Investment Authority, the country’s sovereign wealth fund, and has one of the highest credit ratings in the region. In 2014, QNB earned $2.9 billion, an increase of 10.3% from a year earlier. The bank employs 14,500 people and operates in 26 countries. In September 2014, QNB became the leading shareholder in Ecobank, after increasing its stake to 23.5% with the purchase of an additional 11% interest in the pan-African lender.
Ali Ahmed Al-Kuwari, group CEO
Saudi Arabia | Samba Financial Group
Samba Financial Group, the highest-rated bank in Saudi Arabia, reported an 11.1% rise in earnings for 2014 and a 6% increase in assets. In addition to its UK operations, Samba has expanded internationally in the UAE, Pakistan and Qatar. Samba’s Smart Treasury Electronic Platform, STEP, has been implemented in all 72 Samba branches in the kingdom. The bank is the leading issuer of credit cards in Saudi Arabia and offers “instant” approvals for new credit cards at its branches. Samba Capital was the top Islamic financing bookrunner in Europe, the Middle East and Africa last year.
Eisa Al-Eisa, chairman
United Arab Emirates | National Bank of Abu Dhabi
National Bank of Abu Dhabi, one of the world’s 25 safest banks, has 125 branches in the UAE, and is the country’s largest lender. NBAD also has an international network of 60 branches in 18 countries. The Abu Dhabi government-controlled bank’s earnings rose 18% in 2014, and total assets were up 16% on healthy loan and deposit growth. NBAD was joint bookrunner for the Emaar Malls initial public offering, the largest in Dubai since 2007. It also was joint bookrunner for the first-ever sukuk for non-Islamic sovereigns from both the UK and Hong Kong.
Alex Thursby, group CEO
Yemen | Yemen Commercial Bank
The first private bank formed by local businessmen after the unification of North and South Yemen in 1990, YCB has grown to 22 branches. Before the recent conflict in this country on the southern Arabian peninsula, YCB posted solid growth in earnings and assets. The bank offers a wide range of electronic banking products and services. SabaCard, a venture of YCB and Al Rowaishan Group, provides Visa and MasterCard payments and processing services in Yemen.
Ayed Al-Mashni, general manager and executive president