Arab 100 tables: Top 25 by ROI
Arab 100: Top 25 by return on equity
Arab 100: Top 25 by net profit
Arab 100: Top 25 by total assets
This year’s Arab 100 is againdominated by banks based in the six Gulf Cooperation Council (GCC) states,reflecting their relatively large and well-developed economies. GCC-based banksaccount for 66 of the 100 on 1995 figures, up three on the previous year. TheUnited Arab Emirates (UAE) has 19 names, ahead of Saudi Arabia and Bahrain, with14 entries each. Kuwait’s share is unchanged at 11, while Oman and Qatar rose tofive and three respectively. The Gulf economies received a boost from higher oilprices in 1995, but growth in the region’s private sectors remained subdued asgovernments continued to emphasize cutting high budget deficits. The three stateswith the highest GDP growth rates in the region in 1995 the UAE, Oman andQatar increased their shares of entries in the top 100, while the moresluggish performances of the Bahrain and Saudi Arabian economies is reflected bya smaller representation.
With 1995 GDP of over $125 billion, the Saudi Arabian economy is larger thanthe other five GCC economies combined. Saudi-based financial institutions accountfor five of the Arab world’s 10 largest banks, measured by total capital. Thelargest is the Islamic Development Bank, established in 1973 to foster theeconomic development and social progress of member countries and Muslimcommunities in accordance with Islamic law. It has 48 member countries and itsyear-end 1995 capital was over $3.5 billion.
In second place is the National Commercial Bank (NCB), which recentlyannounced that Sheikh Khalid Bin Mahfouz, who owns 98.8% of the share capital,would be returning as chairman of the executive committee and general manager. In1992 he resigned his position as deputy general manager and chief operatingofficer to defend himself against allegations of fraud by the New York andLuxembourg authorities over his involvement with the collapsed Bank of Credit andCommerce International (BCCI), where he was a director for just under a year inthe late 1980s. The charges against him were subsequently dropped in anout-of-court settlement in 1995.
GCC and north African banks lead
In third place is Riyad Bank, which is nearly 30%-owned by the Saudi ArabianMonetary Agency; in sixth Al Rajhi Banking and Investment Corporation, theworld’s largest bank operating strictly in accordance with Islamic bankingprinciples; and in eighth Saudi American Bank, which is 30%-owned by Citibank.
The Bahrain-based Arab Banking Corporation (ABC) holds its fourth position.Its main shareholders include the Kuwaiti finance ministry, the Abu DhabiInvestment Authority and the Central Bank of Libya. By total assets it is thelargest bank in the Arab world. In April 1995, Ahmed Abdullatif, the formermanaging director of Riyad Bank, became ABC’s president and chief executivefollowing the departure of the long-serving and highly regarded Abdulla Saudi, aLibyan national who was forced to resign because of US pressure.
The only non-GCC bank in the top 10 is the Jordan-based Arab Bank at numberfive, with year-end 1995 capital of over $1.25 billion. Arab Bank’s founders, theShoman family, remain influential and occupy the bank’s most senior positions.Lebanese prime minister Rafiq Hariri is also a major shareholder. Arab Bank alsoholds significant shareholdings in two other banks in the top 100. The mostprominent is its 40% holding in the Saudi-based Arab National Bank (14). Theother holding is in the Arab Tunisian Bank (77)
In seventh place is National Bank of Kuwait (NBK), Kuwait’s largest andstrongest commercial bank. NBK is approximately two-thirds owned by leadingprivate-sector Kuwaiti business groups. Prominent among these are the Al-Kharafi,Al-Bahar and Al-Hamad families, who exercise effective control through boardrepresentation.
The second-largest Kuwaiti institution in the top 10 is the Gulf InvestmentCorporation (GIC), which rose from 10th to ninth. GIC is owned by the six GCCmember states and was established to promote economic growth, develop productiveprivate enterprise and support regional cooperation. GIC in turn 100% owns thesecond-largest bank in the Bahrain offshore banking sector, Gulf InternationalBank (GIB), which maintains an active regional and international presence. GIBalso rose one position to 16th this year. The National Bank of Dubai (10) is theleading UAE-based bank. The ruling family of Dubai is understood to have thelargest stake in it, though not a controlling one.
After the GCC, the most important Arab banking markets are in north Africa,which accounts for 27 of the top 100. Once again Egypt leads the way with 12entries, followed by Tunisia with seven, Morocco with five, Algeria with two andLibya with one. The 11th-ranked Libyan Arab Foreign Bank (LAFB) is the largest bycapital. It is also a major shareholder in two other banks in the top 100: theUAE-based Arab Bank for Investment and Foreign Trade (46) and the Bahrain-basedAl-Ubaf Arab International Bank (81), which is 95% owned by LAFB.
The second-largest north African bank is Moroccan-based CréditPopulaire du Maroc (18). It is government-owned and was established to promotethe development of small to medium-sized domestic businesses. Next comes theNational Bank of Egypt (23), the largest of Egypt’s state-owned commercial banks.The largest Tunisian bank, Banque Nationale Agricole (35), focuses onagricultural credit. The first of the two Algerian-based banks in the top 100 isCrédit Populaire d’Algérie (36).
Bahrain’s diversity
Banks based in Jordan and Lebanon in the top 100 rose from five to seven.Apart from Arab Bank, however, they are well down the list. The highest-rankedLebanese bank is Banque Audi (73), which is owned by the Audi and Sabbahfamilies. It is followed by Banque du Liban et d’Outre-Mer (80) and Byblos Bank(84), which is 64% owned by the Luxembourg-based Byblos Invest Holding. However,Lebanon has over 75 commercial banks and so consolidation is inevitable. CapitalIntelligence expects Lebanese banks to occupy higher positions in these rankingsin the next few years.
By virtue of the size of the Saudi Arabian economy all the country’scommercial banks make the top 100. Apart from the five heavyweights in the top10, another four are in the top 20. Three of these are foreign joint-venturebanks and are very similar in size: Saudi British Bank (12), 40% owned by HSBCHoldings; Al Bank Al Saudi Al Fransi (13), 31% owned by Banque Indosuez; and ArabNational Bank (14), the Arab Bank affiliate. The Arab Petroleum InvestmentsCorporation, owned by all the Organization of Arab Petroleum Exporting Countries(OAPEC) member states, which focuses on financing oil and gas projects, ranks17th, down one from 1994. Other foreign joint-venture banks include Saudi CairoBank (26), 20% owned by Egypt’s Banque du Caire; and Saudi Hollandi Bank (39),40% owned by ABN Amro. Recently, Prince Al-Waleed Bin Talal Bin Abdulaziz AlSaud, the high-profile chairman of United Saudi Commercial Bank (30), took a 33%shareholding in Saudi Cairo Bank, raising the prospects of a merger.
Saudi banks’ results have been affected by measures to curb the country’sbudget deficit. Private-sector activities are estimated to have slowed in 1995 toa nominal growth rate of 2%, down from 4% in 1994. Domestic demand was restrainedby a freeze imposed on public-sector employment and a reduction of governmentsubsidies, which raised the cost of gasoline, utility charges and certain otherpublic-sector services. In certain cases, government payments to suppliers andcontractors were delayed, and this has had knock-on effects on banks. As aresult, Saudi banks invariably recorded rises in non-performing loans during1995.
The diverse and relatively sophisticated nature of the Bahrain financialsector is indicated by the variety of Bahrain-based financial institutions in thetop 100, ranging from international offshore banking units (OBUs) and investmentbanks to local commercial and Islamic banks. The two super-OBUs ArabBanking Corporation and Gulf International Bank are well ahead amongBahrain banks. The innovative and highly profitable Investcorp is third inBahrain and 27th overall. Economic and market conditions in North America andwestern Europe were more conducive to the sale of some of its long-term equityinvestments in 1995. The most notable was the successful global share offering ofthe Gucci Group, a leading designer and distributor of luxury goods. The largestof Bahrain’s commercial banks, the National Bank of Bahrain (NBB), is 45thoverall. The local Bahrain market is clearly overbanked, and margins have beenunder pressure as the economy has slowed. NBB’s largest rival, the Bank ofBahrain and Kuwait (52), whose shareholders include various Kuwaiti banks andgovernment entities, is the only foreign bank operating with a branch in Kuwait.
Kuwait’s banks strengthen
Bahrain’s largest Islamic bank is the Faysal Islamic Bank of Bahrain (67),which operates under both an offshore banking licence and one recently grantedfor local commercial banking. It is 53% owned by the influential Geneva-based DarAl-Maal Al Islami Trust, the other shareholders being wealthy Saudi investors.The bank is active internationally and has a significant presence in Pakistan.United Gulf Bank (50), is 95% owned by the Kuwait Investment Projects Company andcontinues to focus on international financial investments through externallymanaged and partly leveraged funds. Bahrain International Bank (53) is a stronglycapitalized and innovatively managed offshore banking unit. TAIB Bank (65) isactive in Turkey and the former Soviet states of central Asia. Bahrain MiddleEast Bank (68) is largely owned by Kuwaiti interests, including thegovernment-controlled Burgan Bank, and after the installation of a new managementteam in 1993 is continuing to reposition itself successfully as an investmentbank.
The Kuwaiti banking sector strengthened in 1995 and all six of its commercialbanks remain in the top half of the Arab 100. Gulf Bank, Kuwait’s second-largest,dropped one position to number 20. In third place, 24th overall, is CommercialBank of Kuwait (CBK), which was arguably worst hit among Kuwait’s banks by the1982 Souk Al Manakh stock market crisis. Most of its loan book is stillclassified as non-performing. Burgan Bank (25), the youngest Kuwaiti bank whichbegan operations in 1977, is 51% owned by the government of Kuwait and has a 28%stake in Bahrain Middle East Bank. Alahli Bank of Kuwait (28), the third-largestcommercial bank in terms of assets, has, like CBK, had a chequered history and iscurrently restructuring its balance sheet.
UAE buoyant but overbanked
Other Kuwaiti institutions in the Arab 100 include GCC-owned butKuwaiti-based Gulf Investment Corporation (9); the prosperous Kuwait FinanceHouse (37) which is 49% government-controlled and is Kuwait’s premier Islamicbank; and two state-owned specialized banks, Industrial Bank of Kuwait (44) andKuwait Real Estate Bank (48). These two institutions have just announced thatlong-standing merger talks have been suspended. The outlook for Kuwaiti banksremains closely linked with macroeconomic developments. The economy is expectedto cool in 1996, mainly because of sluggish growth in the non-oil sector. Kuwaithad the highest budget deficit to GDP ratio of the GCC states in 1995 (16.1%) andthe government’s retrenchment exercise is dampening growth prospects. Lendingopportunities will remain relatively restricted. Overall, the Kuwaiti market isstill affected by two massive economic shocks in the last 15 years theSouk Al Manakh crisis and the Iraqi invasion with business confidencestill somewhat fragile.
In contrast, banks in the UAE are enjoying strong profit growth in what isgenerally considered the Gulf’s most buoyant economy. GDP is expected to grow by5.6% in 1996, largely as result of a projected 5% growth in the non-oil sectors.Most of the UAE banks improved their rankings. The National Bank of Abu Dhabi(19) is majority-owned by the Abu Dhabi Investment Authority and is the UAE’slargest bank by total assets. It is effectively banker to the government and itsbalance sheet fluctuates with government placements and withdrawals. Abu DhabiCommercial Bank (21) and Emirates Bank International (EBI 22) are theproducts of government-sponsored restructuring initiatives in 1985 when ailingbanks were merged to create larger, sounder institutions. EBI has built up asolid franchise in the UAE’s trading sector and is now looking to become moreactive in international syndicated loans. MashreqBank (31) was established in1967 as Bank of Oman, adopting its present name after organizationalrestructuring in 1993. It is 50% owned by the prominent Al Ghurair family and byassets is the fourth-largest UAE bank.
The Commercial Bank of Dubai (CBD 55) is 20% owned by the governmentof Dubai. It reported one of the largest profits increases (56%) in the UAEduring 1995. CBD is focusing on its commercial business rather than activelyexpanding retail lending. Banks in some of the smaller emirates had mixedperformances in 1995. The National Bank of Fujairah (62) boosted profits fromtrade finance and investment, while the National Bank of Umm Al-Qaiwain (71)reversed 1994’s fall in earnings with higher returns from its loan portfolio. TheNational Bank of Ras Al-Khaimah’s (78) net income was marginally lower, althoughthe previous year’s performance had been distorted by a large write-back ofprovisions. Overall, with 47 banks, the UAE market is overbanked andconsolidation among smaller players would make commercial sense. And although theUAE has been more successful than some other GCC states at reducing itsdependency on oil, there are doubts about how some of the more marginal bankswould perform were there to be a sharp downturn in the UAE economy. Fortunately,in the short term, that prospect looks remote.
Rankings by other criteria
When ranked by total assets, Saudi Arabian banks continue to dominate, withnine representatives in the top 25. Arab Banking Corporation of Bahrain remainsthe Arab world’s largest bank by assets, with $21.3 billion at year-end 1995.Then come two Saudi banks: National Commercial Bank (2) and Riyad Bank (3). Infourth and fifth places, as in 1994, come Jordan’s Arab Bank (5) and NationalBank of Kuwait (7).
The two largest Egyptian public-sector banks vie for the sixth and seventhpositions, with Banque MISR (33) just edging ahead of National Bank of Egypt(23). Saudi American Bank (8) continues to occupy eighth place, ahead of GulfInternational Corporation (9) in ninth position.
When ranked by return on assets, smaller banks based in the UAE and Bahrain,led by Middle East Bank (72), occupy 17 of the top 25 positions, with 10 andseven banks, respectively. Saudi Arabia is down to four in the top 25 on thismeasure, while Oman, Kuwait, Egypt and Tunisia each have one representative.
In terms of return on equity, the leaders are more evenly distributed,although 11 of the top 25 are banks operating in the more dynamic economies ofthe UAE and Oman, with seven and four banks, respectively. As in 1994, the mostprofitable Arab bank by this measure was the Egyptian American Bank. Overall,Egypt and Saudi Arabia have four entries each, Kuwait has three, Lebanon has twoand Tunisia has one entry in the top 25.
Special mention should be made of the two banks that are in all four top-25rankings by capital, assets, return on equity and return on assets. Theyare the Saudi Arabian-based Al Rajhi Banking and Investment Corporation (6) andSaudi American Bank (8).
Martin Gallagher and Andrew Ioannou are analysts at Cyprus-based CapitalIntelligence, a bank analysis and rating service.
Notes
This survey covered the following countries:
Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco,Oman, Qatar, Saudi Arabia, Tunisia and the United Arab Emirates
Total capital was defined as tier one capital plus tier two(supplementary capital) where available
Total assets are given as reported in banks’ financial statementsnet of contra accounts
Net profit is stated net of tax and before dividend distribution orallocation to reserves
The rankings are based on information provided by Capital Intelligence.Rankings for 1995 may differ from those published in last September’s edition ofEuromoney; this is due to updates and revisions in the figures.
