Arab 100 2002: Earnings fall at many Arab banks
Despite robust GDP growth in 2001 in most Arab countries, their banks suffered falling earnings because of more domestic competition, weakness in global investment markets, tighter margins, and higher loan-loss provisions.
The top 100 Arab banks saw net profit fall by 2% in 2001 following a 15% increase in 2000 on an aggregated basis. In turn, the overall return on equity fell to 12.84% from 13.94% in 2000, and the return on assets to 1.2% in 2001 from 1.3% the previous year.
There were variations among country performances. with banks in Saudi Arabia and Kuwait performing well whilst many Bahrain-based banks recorded poorer results, as did Egyptian and Lebanese banks.
The Saudi banking sector continues to be the largest and strongest in the region, aided by the tightly regulated nature of the system. Saudi banks generally display very solid overall financials with high levels of capital and liquidity, and good returns.
Arab Banking Corporation (ABC), headquartered in Bahrain, is the largest of the Arab banks based on total capital. ABC's net profit fell by a high 20% in 2001 to $102 million. The bank's profitability ratios are extremely low, with ROE at just 4.4% and ROA at only 0.38%.
ABC's strategy centres on international financial activities related to the Arab world.