Arab 100 2003:On the mend after a poor year
After a weak 2001, most Arab banks enjoyed little pick-up in their fortunes in 2002. However, early results in 2003 suggest that the tide may be turning.
BANKS IN ARAB countries faced growing domestic competition, continued weakness in global investment markets, tighter margins and higher loan and investment loss provisions in 2002. The top 100 Arab banks' net profits grew by just 0.7% last year on an aggregated basis, following a fall in 2001. Overall return on equity fell to 12.9% in 2002 from 14.1% in 2001.
There were variations in country performance, with most banks in Saudi Arabia, Qatar and Oman performing well while many in Bahrain, Egypt and Tunisia recorded weaker results.
The largest 20 institutions dominate the top 100 Arab banks, constituting a high 56% of the combined capital base, 50% of assets and 61% of consolidated net profit. The aggregated return on equity (ROE) for the top 20 banks, at 14.1%, is higher than the overall sector average, as is their average return on assets (ROA) of 1.5% compared with an average 1.2%. These figures indicate the advantage of size and resources in respect to margin control, a diversified earnings base, and economies of scale.
Arab Bank Group's unmatched diversity
Based on total capital at end 2002, the Arab Bank Group (ABG) of Jordan was the largest bank in the Arab world, with capital of $2.6