WP/10/87

The GCC Banking Sector: Topography and Analysis
Abdullah Al-Hassan, May Khamis, and Nada Oulidi

© 2010 International Monetary Fund

WP/10/87

IMF Working Paper Monetary and Capital Markets and Middle East and Central Asia Departments The GCC Banking Sector: Topography and Analysis Prepared by Abdullah Al-Hassan, May Khamis, and Nada Oulidi Authorized for distribution by Daniel Hardy and Abdelhak Senhadji April 2010

Abstract This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

In this paper, we analyze the evolution of the Gulf Cooperation Council (GCC) banking sectors in the six member countries including ownership, concentration, cross-border linkages, balance sheet exposures and risks, recent trends in credit growth, and financial soundness. We identify risks to the banking sector's financial stability in the context of the current global crisis and their mitigating factors.

JEL Classification Numbers: G20; G21 Keywords: Gulf Cooperation Council; banking sector; credit growth; financial statements Authors’ E-Mail Addresses: aalhassan@imf.org; mkhamis@imf.org; noulidi@imf.org

2 Contents Page

I. Introduction ............................................................................................................................4 II. Structure of the GCC Financial System ................................................................................5 III. Recent Trends in Credit Growth ..........................................................................................9 IV. GCC Banking Sector Balance Sheets: Stylized Facts .......................................................10 V. Credit Concentration and Risks ..........................................................................................14 VI. Financial Soundness ..........................................................................................................19 VIII. Conclusion and Policy implications ................................................................................27 References ................................................................................................................................43 Tables 1.  2.  3.  4. 

Total Banking Sector Assets ..........................................................................................5  Ownership Structure of the Domestic Banking System ................................................9  Contribution of Balance Sheet Items to Private Sector Credit Growth .......................15  Financial Soundness Indicators....................................................................................20 

Figures 1.  Average Annual Private Sector Credit Growth, 2003–08 .............................................9  2.  Selected Emerging Countries: Private sector Credit to GDP, 2008.............................10  3.  Oil Prices and Private Sector Credit Growth ...............................................................10  4.  Deposits as Percent of Non-oil GDP ...........................................................................10  5.  Banking Sector Liability and Equity Structure, 2008 ..................................................11  6.  Banking Sector Assets Structure, 2008 ........................................................................12  7.  Foreign Liabilities to Total Liabilities .........................................................................13  8.  International Comparison of Banks’ Holdings of Securities .......................................14  9.  Bank Loans Sectoral Distribution ................................................................................16  10.  Distribution of Household Credit.................................................................................17  11.  Income Analysis of GCC Banks, 2005–Q1 2009 ........................................................22  12.  Banks’ Provisions and Investment Income, 2005–Q1 2009 ........................................24  13.  Change in Bank Profitability, 2007–09 .......................................................................24  14.  Banks’ External Financing...........................................................................................25  15.  Banking Sector Liquidity in Selected Countries, 2007................................................25  16.  Commercial Banks’ Reserves with Central Bank, December 2007 ............................25  17.  Liquidity Indicators of GCC Banking Sectors .............................................................26  Box 1.

Highlights of the GCC Financial Sector ........................................................................6

3 Appendixes I. List of Commercial Banks in GCC Countries .............................................................28 II. Concentration of the Banking Sector ...........................................................................31 III. Ownership Structure of GCC Domestic Banks ...........................................................34 IV. Aggregated Financial Statements of the GCC Banking Sector ...................................37

The 2008–09 global recession put an end to the boom by diminishing oil revenues. Kuwait. shareholders and capital base structures. and bullish consumer and investor sentiments spurred non-oil real sector and rapid credit growth with associated build-up of domestic imbalances (e. The existing literature is. However. Saudi Arabia. Among those are increased reliance on external financing. and financial soundness. devoid of analyses or regional comparisons of GCC countries’ financial systems. including cross-border ownership within the GCC. First. As analysis of GCC banking sectors is essential in gauging sources of strengths and vulnerabilities. While credit growth was essentially funded by a relatively stable domestic deposit base.g. In this paper. During the 2003–08 oil price boom.2 which exposes them to the vagaries of international oil prices.E. Third. we examine GCC banking sectors’ balance sheet exposures. Oman. however. All GCC countries are large oil exporters with fixed exchange rate regimes. Qatar.. These have supported to a large extent GCC banks’ resilience to the financial crisis. and the United Arab Emirates (U. which exhibits a number of common structural characteristics across countries. The similarities in economic structure imply common sources of strengths and vulnerabilities of their financial systems. and understanding how these systems could be affected with changing economic conditions. Section III examines the funding sources for banks and the importance 1 Includes Bahrain. abundant banking sector liquidity. Second. funding sources. 2 .4 I. Section I describes the structure of the financial sector. where its currency is begged to a basket of currencies. more volatile external funding became increasingly important. the predominance of domestic banks across the region minimized direct cross-border spillovers through the ownership channel within GCC and from international banks. the GCC banking systems had some vulnerabilities that were revealed by the recent global crisis and the impact it had on the economies of the GCC countries. and high exposures to the real estate and construction sectors and equity prices. the high share of the traditional banking book in banks’ on. procyclical government spending.A. With except to Kuwait. The remainder of this paper is organized as follow.). We show that the financial systems in the region are dominated by the banking sector. Section II analyses the balance sheet of the banking sector including recent trends in credit growth and its contributing factors. INTRODUCTION The economies of the country members of the Gulf Cooperation Council (GCC)1 share a number of commonalities.and off-balance sheets limited losses from exposures to structured products and derivatives to a few isolated cases. the banking sectors in the GCC countries were buttressed by high profits and capital buffers in the run-up to the 2008-09 global recession and international financial crisis. asset price bubbles). and straining the rollover of private sector external debt. reversing short-term capital inflows to the GCC region.

1/ The increase in 2007 for Bahrain is due to the fact that some wholesale banks were re-licensed to retail banks. in Bahrain.3 Islamic banks have grown in recent years to become a prominent source of financial intermediation in the Gulf countries. and the U. and liquidity. Saudi Arabia. The discussion below on the GCC nonbank financial system is based on International Monetary Fund (2010). controlling on average 24 percent of the region’s banking system assets.E. STRUCTURE OF THE GCC FINANCIAL SYSTEM The financial sector in the GCC is generally dominated by the banking sector. Section IV examines the loan portfolio exposures and the resulting credit risk. which is relatively concentrated with a few domestic players dominating the market (Box 1. See Appendix I for a list of banks operating in the GCC. The latter are mostly in the form of foreign bank branches. and authors' estimates. In all six countries. although they tend to remain largely focused on domestic equity and real estate.A. 4 . II. 42 percent is 3 In this paper. although on a limited basis. Investment funds have been growing rapidly in several countries.5 of external funding in view of the current drought in international capital markets. Nonbank financial institutions (NBFIs) have limited presence in the GCC. Section V analyzes the financial soundness of the banking sector with regard to capitalization. earnings quality and sustainability.E. Table 1. 2002–08 (In percent of GDP) 2002 2003 2004 2005 2006 2007 1/ 2008 Bahrain 106 106 108 105 123 254 258 Kuwait 120 103 94 81 84 101 84 Oman 52 52 50 45 50 64 66 Qatar 85 84 76 80 85 103 94 Saudi 68 64 65 61 61 71 68 U. with some exceptions.4 Most mutual investment funds are bank-owned. the term “domestic banks” refers to banks that are majority-owned by domestic shareholders. GCC: Total Banking Sector Assets. the largest five banks are domestic and account for 50–80 percent of total banking sector assets. and Appendix II for bank concentration. while foreign banks refer to banks with majority foreign ownership. and Table 1). they are present. Kuwait has 95 Investment companies (ICs) with total assets under management of more than 100 percent of GDP at end-2008. of which.A. and Section VI concludes with policy lessons. asset quality and concentration. 111 105 107 120 133 162 142 Sources: IFS.

E. Kuwait. with combined lending amounting to around 16 percent of banks’ officially reported real estate lending and 3 percent of banks’ private sector credit. the wholesale banking sector has been strongly affected by the global crisis.A. there are 95 Investment companies (ICs) with total assets (both on. Bahrain. The banking sector is highly concentrated with the two largest banks (National Bank of Kuwait and Kuwait Finance House) accounting for half of the banks’ total assets. the General Organization for Social Insurance. In addition to the banking sector. The U. Bank ownership is still predominantly held by the government. Emirates Bank International. with total assets at around 1200 percent of GDP. with assets amounting to close to 260 percent of GDP at end-2008.A. . Bahrain also has a vibrant wholesale banking sector1—the largest of which is Arab Bank Corporation—which provides off-shore. and Al Rajhi Bank) accounting for 45 percent of total assets. but these have a marginal share of financial sector assets. has the second largest banking sector in the GCC after Bahrain. In addition to banks. National Bank of Bahrain. with the ability to obtain funding through deposit taking. investment banking. The sector is only moderately concentrated with the three largest banks (National Commercial Bank. Highlights of the GCC Financial Sector The following are the main highlights of the structure of the financial sector in the individual GCC countries.E.A. but local banks still have well-established franchises in domestic business. Foreign banks are essentially engaged in financing large infrastructure projects and investment banking. Qatar. Public ownership (including quasi government) is fairly extensive in four banks and reaches 80 percent in the largest bank. and project finance services to the rest of the region..6 Box 1. includes two important Islamic mortgage finance companies. U. The financial sector altogether contributes about one-third of the country’s GDP and employs around 3 percent of its workforce. The retail banking sector is the largest in the region. These provide interest free loans for public policy purposes. some of the largest government projects are directly financed by foreign banks. the National Commercial Bank.E. and Ahli United Bank) constitute 41 percent of the total banking sector’s assets. and Abu Dhabi Commercial Bank) account for 32 percent of total assets. This sector has been strongly affected by tight global liquidity conditions and falling asset prices. As a result. The authorities are currently considering the possibility of converting the two companies to a bank. Together with the U. The banking sector is relatively small. The entry of foreign banks under the Qatar Financial Center has increased competition.The two companies are being restructured by a federal committee after the Government announced in November 2008 that they were to be merged. In view of its linkages with global financial markets. There are five sizable specialized credit institutions with asset size close to half that of the banking sector.. In addition to the banking sector.A. Bahrain is home to a number of investment funds with assets under management close to 80 percent of GDP. The sector is highly concentrated with the three largest local banks (Qatar National Bank. The banking sector is highly concentrated with the largest two banks (Bank Muscat and the National Bank of Oman) controlling more than 55 percent of the sector’s assets. the financial sector of the U. with total assets accounting for over 140 percent of GDP. there are three specialized government-owned banks operating mainly in developmental and housing projects. Bahrain’s retail banking sector is the least concentrated among the GCC systems. The banking system in Qatar is the third largest after Bahrain and the U. in addition to six finance and leasing companies. The three largest retail banks (Bank of Bahrain and Kuwait.E. and Doha Bank) accounting for close to 70 percent of total assets. and the Saudi Fund for Development) that dominate the primary market for government securities. Commercial Bank of Qatar. The two companies have been highly dependent on short-term funds from the domestic banking sector to finance their long-term lending operations.E. The rest of the nonbank financial institutions (NBFIs) account for a marginal share of the total financial system’s assets. Saudi Arabia. with assets around 94 percent of GDP at end-2008. Oman. The banking system is the smallest in the region with a share of 66 percent of GDP. The banking system is the least concentrated and the three largest banks (National Bank of Abu Dhabi.A. with assets at around 68 percent of GDP at end-2008. There are also three autonomous government institutions (the Pension Fund.and off-balance sheet) of around 102 percent of GDP—around 42 percent of which is on account of proprietary trading. In addition to banks. Samba Financial Group.

respectively.5 Their relatively large asset size and increasing reliance on the banking sector for financing has raised their systemic risk and possible spillover effects on the banking sector.E. acquisitions. banks from the Middle East and South Asia.A. Wholesale banks include branches of global banks. GCC markets generally lack institutional investors whose long-term horizons help dampen volatility. particularly as governments drew down outstanding debt in recent years. GCC market capitalization leapt from $117 billion (29 percent of GDP) in 2003 to $1. had lending worth only about 3 percent of the banking sector’s loans.0 31. Local debt markets are underdeveloped. and are most important in the U. They contribute little to the accumulation of long-term resources for investment. Nonbank finance companies are scarce. and 20. Moody's.A. Investment banks in Bahrain are fewer. and locallyincorporated banks (domestically owned and subsidiaries of foreign banks).000 million. forward trading.7 GCC: Concentration of the Banking System. and private placements) and private equity.7 percent in U. which are mainly defined benefit.1 trillion (177 percent of GDP) in 2005. now in restructuring. ICs provide asset management services such as brokerage.2 percent of GDP in Saudi Arabia (end-2007). (as percent of total banking sector assets) Top 3 banks Top 5 banks 40. although the two largest companies.4 79. Minimum domestic loan sizes and deposits are $27 million and $100. “pay-as-you-go” schemes. IPOs.5 66. The insurance sector remains small and is focused on property/casualty risks. proprietary.E. GCC issuers boosted the use of sukuk until mid-2008 when sukuk issuance worldwide grew from around $5 billion per year in 2001–04 to $32 billion in 2007. pension fund assets amounted to 3. 2. However.1 67. Loan limits do not apply to interbank loans or to investments in locallyincorporated banks. 2007 Bahrain Kuwait Oman Qatar Saudi Arabia U. portfolio management.5 percent in Bahrain (end-2006).5 63. Stock market capitalization has grown strongly in recent years. and authors' estimates. (end-2007). For example. local and international fund management and financial services such as corporate finance advisory services (mergers. most of it dollar-denominated by GCC entities. 5 . but fell back to $650 billion (73 percent of GDP) by mid-2009. Contractual savings are underdeveloped and dominated by public pension systems.A. before falling to $15 billion in 2008.6 Sources: Country authorities.7 45.0 65.. underwriting.6 81.0 81.5 49.E.8 47. __________________________ 1/ Wholesale banks are prohibited from accepting retail deposits (both domestic and foreign) and are subject to minimum loan limits to the domestic economy. but larger.

A. is important.E. 12 percent in Oman.3 percent). 10 percent in Qatar. foreign bank presence in Bahrain and the U.8 The ownership structure of banks6 The banking sector is largely domestically owned. except in the U.E. Therefore. a significant amount of which is attributed to direct ownership by the Government (41. respectively). Market shares of foreign banks by total assets in the rest of the GCC are 2 percent in Saudi Arabia.A. banks that are majority owned by domestic shareholders) continues to have significant public and quasi public sector ownership.’s domestic banking system stands out with almost half of the domestic sector’s assets owned by the public sector. including GCC banks. ranging between 13 percent in Kuwait and over 52 percent in the U..A. This reflects entry barriers and licensing restrictions for foreign banks. at 57 and 21 percent of total assets. Except for Bahrain.A.A. Data on bank ownership is as of end-2007 in order to abstract from capital injections by the public sector in 2008 and 2009 in response to global developments.5 percent) and the Royal family (10. The domestic banking sector in the GCC (i. 6 The discussion below is based on end-2007 data to abstract from the impact of capital injections by the U.E. and Appendix III). royal family ownership in the GCC is almost nonexistent. and U. although the majority of this is attributed to quasi government ownership. In view of the above. mostly by non-GCC investors (around 13 percent of the domestic sector’s assets).E.A.E. as these should be viewed as temporary. in many cases as single branches. the cross-border presence of GCC banks and other foreign banks is limited and is mostly in the form of branches. As noted above. respectively. The U.A. mostly from the GCC.A. Contrary to common perceptions.e. and Bahrain have important foreign bank presence in the banking sector. and 10 percent in Kuwait. Saudi Arabia (40 percent for non-GCC nationals and 60 percent for GCC nationals). and Bahrain and Oman have sizeable joint ventures in the domestic banking system with foreign investors.E. with some exceptions. 7 . but its extent varies considerably. (40 percent).7 Oman and Saudi Arabia have a relatively high public sector ownership (30 percent and 35 percent. direct cross-border linkages within the GCC and also with other foreign jurisdictions through cross-border ownership are relatively low. the U.E. all GCC countries have limits on foreign ownership: Oman (35 percent). However. (Table 2. Joint ventures in the domestic banking sector in Saudi Arabia are small.E. and are negligible in Kuwait and the U. Kuwait and Qatar (49 percent). and Qatari governments in 2008-09.

When 20 15 measured in relation to non-oil GDP. Over the period 2003–08.A. RECENT TRENDS IN CREDIT GROWTH The GCC region has witnessed in recent years rapid credit growth to the private sector (Figure 1).0 52.8 34.1 … … … 30. high rates of credit growth witnessed in some GCC countries during 2003–08 have increased these systems’ vulnerability to a downturn in economic activity.0 30.E.0 20.0 16. experienced significant private sector credit growth at around 45 and Figure 1. the ratio of private sector credit 30 to GDP compares favorably to other 25 emerging countries (Figure 2). In view of this 40 35 growth.7 0. 10 credit to the private sector in the GCC 5 0 registers the highest rates among Bahrain Kuwait Oman Qatar Saudi Arabia U. Qatar and the U. 2003-2008 35 percent.2 … Bahrain Kuwait Oman Qatar Saudi Arabia U.7 3. end-2007 1/ (In percent of total assets) Public Total 20.0 13.2 0. and authors' calculations.0 … 1.0 1.8 87. as international experience shows.0 10.5 41.0 40.E.5 10.4 … 17. Notwithstanding the Source: Country Authorities.7 3. GCC: Ownership Structure of the Domestic Banking System.4 13.0 47. III.3 Quasi Domestic Government 2/ Royal Family Government 2/ 11. Sources: Bank's annual reports.0 14. .3 20.E. 1/ The domestic banking system refers to banks that have domestic majority ownership.0 … 0.0 0.A.9 Table 2. emerging countries.0 … 13. GCC: Average Annual Private Sector Credit Growth.0 18.0 12. respectively.0 0.6 Private Foreign Total GCC Non-GCC 37.7 35.0 3. 2/ Quasi government includes public pension funds and social security.6 52.0 … 19. positive impact of increasing bank intermediation in the GCC on economic activity. Therefore.0 75. while Oman (In Percent) 50 had the slowest rate in the region at 45 around 20 percent. high rates of credit growth during an economic upturn almost invariably lead to high levels of credit defaults when economic activity slows.4 9.3 Private Domestic Total 41.A.

spurred business confidence and local and regional private sector activities and investments. where the latter expanded economic activities and investments (see Figure 9). GCC BANKING SECTOR BALANCE SHEETS: STYLIZED FACTS The banking sector in the GCC still relies on the traditional deposits and loans as the main sources and uses of funds (Figures 5 and 6. deposits in the banking sector grew as private sector income increased (Figure 4). Oil Prices and Private Sector Credit Growth Growth of Credit to Private Sector (LHS) Average Oil Pirces (RHS) ($) 80 Figure 4.E. and Appendix IV). As for demand. credit to the private sector has been spurred by the increase in international oil prices (Figure 3). This in turn boosted banks’ lending capacity. banking sector credit was reoriented from the public to the private sector. Albeit indirectly. Selected Emerging Countries: Private Sector Credit to GDP. IV. (%) 40 30 20 10 0 2002 2003 2004 2005 2006 2007 Source: IFS. GCC. The impact was translated into a concomitant increase in the demand and supply of credit. As regard to supply. 2008 (In percent) 100 90 80 70 60 50 40 30 20 10 0 Qatar Turkey UAE Russia Oman Jordan South Africa Kazakhstan Egypt Saudi Arabia Morocco Kuwait India Brazil Bahrain Ukraine Tunisia Lebanon Colombia Source: IFS and World Economic Outlook (IMF). GCC: Deposits as Percent of Non-oil GDP 2002 2008 160 140 60 120 100 80 40 60 40 20 20 0 0 Bahrain Kuwait Oman Qatar Source: IFS. and authors' estimates. Interbank liabilities are significant in Kuwait and also important 8 See Crowley (2008) and Hesse and Poghosyan (2009). Saudi Arabia U.10 Figure 2.A. although it has increased in some countries particularly in 2006 and 2007 (Figure 7). The role of foreign liabilities as a source of funding is still limited.8 Higher oil prices have boosted government spending and non-oil GDP growth and. . Figure 3. and authors' estimates. as a result.

11 Figure 5. 2008 Bahrain 10% 2% 9% 1% 5% 10% 24% Kuwait 15% 64% 60% Oman 14% 5% 2% 5% 1% 16% 16% Qatar 16% 63% 62% Saudi Arabia 14% 5% 8% 11% U.A. GCC: Banking Sector Liability and Equity Structure.E. . 11% 1% 27% 1% 72% 50% Due to Banks Customers Deposits Bonds Other Liabilities Minority Interest Total Shareholders' Equity Source: Banks' Annual Reports f rom Zawya. and authors' estimates.

and authors' estimates. 2008 Bahrain 2% 6% 8% 9% 16% Kuwait 2% 9% 13% 8% 8% 59% 60% Oman 1% 2% 1% 9% 8% 12% 8% Qatar 9% 5% 16% 68% 61% Saudi Arabia 16% 10% 9% U.12 Figure 6. 1% 8% 6% 5% 1% 22% 51% 71% Cash & Bal.E.A. GCC: Banking Sector Assets Structure. with CB Due from Banks Loans/Islamic Finance Products Securities Investments Fixed Assets Other Assets Source: Banks' Annual Reports f rom Zawya. .

13 Figure 7. however. Mudaraba. or financial derivatives. which increases 9 Islamic banks’ finance products include Murabaha.10 Funding of credit growth A breakdown of credit growth during 2002–08 into its contributing factors confirms that client deposits have been the main contributor to credit growth for the six countries over the period (Table 3). This has exacerbated the maturity mismatches between assets and liabilities in GCC banks in general. 25 20 15 10 5 0 25 20 15 10 5 0 Jan-03 Aug-03 Mar-04 Oct-04 May. which is an important share of banks’ balance sheets by international comparison (Figure 8). Musharaka. 16. An analysis of the 50 top GCC banks (conventional and Islamic) based on Bankscope data indicates that. and 16 percent of the total balance sheet (end-2008). in Oman and Qatar at 27. 9 and securities range between 8 percent in Qatar. equities. although there is no indication that these assets were held in high risk asset classes. GCC: Foreign Liabilities to Total Liabilities. and other Islamic banking products. GCC banks continue to have a very small share of bond financing (up to 2 percent of total liabilities). securities investments. The funding pattern.Dec-05 Jul-06 Feb-07 Sep-07 Apr-08 Nov-08 05 Sources: Country authorities. 2003–08 (In percent) 30 Kuwait Oman Saudi Arabia 30 Qatar U. to a lesser degree. has been relatively volatile. Banks’ assets are mainly composed of loans and. Note: Bahrain is excluded from the chart as the relicensing of some wholesale banks into retail banks in early 2007 complicates the analysis of the ratio of foreign liabilities to total liabilities. up to 23 percent in Saudi Arabia. respectively.E.) of banks’ portfolios. and IMF staff estimates. In the current crisis. only about 1 percent was held in equities or derivatives (2 percent in the case of Islamic banks). on average. Of which. banks in the GCC held 18 percent of their portfolios in securities at end-2008. banks have registered significant losses related to these investments through mark-to-market valuations of their trading portfolios. Loans and Islamic finance products constitute between 50 percent (Saudi Arabia) and 71 percent (U. Ijara.A.A. 10 . Istisnaa. International Monetary Fund (2009).E.

A.E.14 banks’ funding risk generally. in 2006 and for Oman. foreign financing markedly declined as speculative capital inflows reversed and. international capital markets dried out.E. Saudi Arabia. relates largely to banks’ issuance of foreign debt to support credit growth and also to address asset/liabilities maturity mismatches through the issuance of medium-term notes. but more importantly to direct external financing of large real 11 The break down follows the following formula: k CPRt Lit At j Lit 1 At j1  i   j  CPRt 1 i Lt 1 CPRt 1 j 1 At 1 CPRt 1 Where CPR is credit to the private sector. and the U.A.E. in 2007. Aj are bank assets other than credit to the private sector. CREDIT CONCENTRATION AND RISKS The concentration of credit portfolios in GCC countries varies considerably within the GCC (Figure 9). In 2007.A. Sy (2005).E. Figure 8: International Comparison of Banks' Holdings of Securities 45 40 35 30 25 20 15 10 5 0 India Turkey Indonesia Norway Colombia Canada Germany Thailand Spain Lebanon Saudi Arabia Costa Rica Malaysia United States Mexico Korea Philippines Bahrain New Zealand Sweden South Africa Singapore Hungary Kuwait Oman UAE Qatar Panama Australia (in percent of total assets) Source: A. This exposure increased sharply since 2002 in Qatar and Bahrain and.11 A closer look shows that foreign liabilities have played a significant role in explaining the rapid credit growth for the U. The increase in 2006 in net foreign liabilities in the U. Kuwait. to a lesser extent. Banks’ exposures to the construction and real estate sectors are significant in Kuwait and Bahrain and are also important in Qatar and the U. This could be attributed to the presence of domestic real estate and mortgage finance companies (although these are relatively small).E.A. banks’ exposure to the construction and real estate sectors appears relatively low in view of the construction and real estate boom that the country witnessed during this period. U.A. V. Qatar. the increase in the four countries reflects short-term capital inflows in speculation of an appreciation of GCC currencies. and Li are bank liabilities including capital . to a lesser extent. As oil prices declined in the second half of 2008.

WEO.15 Table 3. 2002-08 (percent) Cash and Reserves Bahrain 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 -13 -68 2 -20 -4 -57 6 23 46 11 -21 -23 -10 26 -248 -285 38 -46 -11 -76 -3 19 -7 -12 -8 -4 -49 16 -132 76 -6 -1 -48 -56 7 14 -14 -25 -9 -15 -104 37 Net claims on Government 18 -18 11 -9 14 12 14 28 12 53 24 24 -24 -2 379 -127 51 65 10 9 25 205 6 23 26 34 2 -109 -4 -182 1 13 3 -23 -39 20 -42 1 7 -6 -3 20 Foreign assets -12 -84 -47 -35 -292 -604 -116 -53 1 -51 -30 -47 -48 -30 -832 -39 -114 -55 -85 -3 -20 137 -80 -101 -65 -94 -55 -17 21 64 -14 1 -96 -18 -3 -90 3 -35 -52 -51 21 -2 Foreign liabilities 11 105 82 -4 188 532 161 59 -6 -7 22 28 63 -14 -446 -183 -43 -26 47 48 1 -10 29 56 11 58 95 48 -89 -13 7 16 -24 45 5 0 2 29 46 82 85 -13 Net foreign liabilities -1 21 35 -39 -105 -72 45 6 -5 -58 -9 -19 15 -44 -1277 -223 -157 -80 -39 44 -19 127 -51 -46 -54 -36 40 31 -68 51 -7 17 -120 28 1 -90 5 -6 -6 32 106 -16 Client deposits 61 170 24 135 95 127 56 51 41 83 68 90 101 115 1096 117 44 142 108 95 51 -179 95 93 91 93 70 131 252 129 78 49 267 128 38 103 125 109 79 63 97 34 Other debt … … … … … … … 56 -4 -29 -19 8 4 -18 0 0 0 4 5 -1 30 5 1 3 0 -1 3 11 -5 10 -2 -2 -2 -1 7 0 0 0 0 0 0 11 Other items net 12 -26 11 10 54 39 -21 -75 -3 19 31 9 -12 24 88 455 85 -2 16 -21 0 -42 26 -15 18 -12 3 9 36 10 25 3 -56 3 19 26 9 2 3 3 -11 2 Capital 23 21 18 23 46 52 0 11 14 20 25 12 27 -2 62 162 39 18 11 49 15 -34 29 54 27 25 31 21 21 6 11 19 56 21 16 28 17 19 27 23 16 12 Kuwait Oman Qatar Saudi Arabia UAE Source: IFS. . GCC: Contribution of Balance Sheet Items to Private Sector Credit Growth. and authors' calculations.

Saudi Arabia. . and authors' estimates. Direct credit to the government constitutes a marginal share of loans in most countries with the exception of Qatar. and the U.E. which lowers the risk of lending to this category. Kuwait. although credit to government declined from much higher levels witnessed in the early 2000s. estate projects. GCC banks have a relatively high concentration of credit to large business groups and high net worth individuals.. On the other hand. lending to the public sector has declined sharply as GCC governments benefited from rising oil prices in recent years and therefore a decline in the need to finance domestic projects through bank borrowing.and for the U.E.12 Household loans in the GCC are generally limited to salaried individuals. Households sector in Oman and Qatar might inculde residential mortgages.A. Saudi Arabia.A. Household lending in Saudi Arabia for consumption or possibly equity investment appears to have also increased as indicated by the increase in the “other” category from around 46 percent of household loans to 72 percent during 2002–08. which is as of end-2008. and the U.A. Credit to nonbank financial entities has witnessed a notable increase in Kuwait and the U... in particular by Dubai corporates.A. with levels specifically high in Kuwait. and lending for equity investment in Kuwait (Figure 10). Within household lending. 2008 data for Kuwait reflects end-September 2008. GCC: Bank Loans Sectoral Distribution (in percent) 60 40 35 30 25 20 15 10 5 0 Households 45 40 35 30 25 20 15 10 5 0 Households 35 30 25 20 15 10 10 Real Estate and Constructions Trade Manufacturing Financial Others Government 30 Real Estate and Constructions Trade Manufacturing Financial Others Government 20 10 0 Households Real Estate and Constructions Trade Manufacturing Financial Others 40 30 Bahrain 50 Kuwait 2002 2008 Oman 50 45 40 35 30 25 20 15 10 5 0 Households Real Estate and Constructions Qatar Trade Manufacturing Others Government Saudi Arabia 25 20 UAE 15 1/5Data for Bahrain relates to the retail banking sector only.E.E.A.16 Figure 9.E it reflects end-June except for CAR.E. 2008 data reflects end.A. there has been a marked increase in consumer lending in the U. Note: Construction and Real estate in Bahrain. 0 Households Real Estate and Constructions Trade Manufacturing Financial Others Government 5 0 Households Real Estate and Constructions Trade Manufacturing Financial Others Government Source: Country authorities. As regards large exposures. inculde both residential and commercial. Kuwait. although risks remain in 12 Detailed data on household lending is only available for Bahrain. where it constitutes more than 27 percent of loans. fir the U.

This increases the credit risk associated with this category.13 This highly exposes Kuwaiti banks to market induced credit risk. respectively. in cases where there is a significant slowdown in economic activity).” These account for around 52 percent of household lending. the Central Bank of Kuwait has recently prevented banks from liquidating margin trading accounts that fall below margin to limit the impact on the market and also on households. The banking portfolio is highly exposed to the real estate and construction sectors. household loans in Bahrain are mainly secured by salary which mitigates the risk of default. or close to 12 percent of banks’ loan portfolios in 2008). by country. Bahrain. However. With regard to household loans. these are mainly composed of loans facilitating equity margin purchases (36 percent of total household lending.17 relation to situations that involve significant layoffs of expatriate workers (for example. Overall. Household loans (excluding mortgages) and nonbank financial institutions (mainly to investment companies) are also important in banks’ loans portfolios accounting for 16 and 12 percent of total loans. The Real estate loans for households are included in the “construction and real estate. The following is an analysis of the main risk exposures for the GCC. banks are highly exposed to Kuwait’s troubled investment companies. the retail banking portfolio in Bahrain is highly exposed to construction and real estate (33 percent of total loans) and the household sectors (23 percent). Kuwait. To address pressures created by the current global crisis. which constitute close to 50 percent of total loans.14 Additionally. 14 13 .

Real estate loans in Saudi Arabia are marginal compared to the rest of the GCC at less than 10 percent of total loans. and 27 percent of total loans. including household mortgages). The banking sector is mostly concentrated in the household. and to the household sector (20 percent. mainly active in the real estate and stock markets. Qatar. Prudential regulations in Saudi Arabia curb credit growth risks by requiring banks to obtain Saudi Arabia Monetary Authority’s approval for foreign lending and by imposing statutory caps on individual indebtedness. Oman. As regards the household sector. Saudi Arabia. and government sectors. which accounts for approximately 40 percent of total loans. U.15 Rising consumer indebtedness raises concerns as Omani households are highly leveraged with household loans accounting for 17 percent of GDP. The banking portfolio 15 16 The Central bank of Oman established a lending cap limiting personal loans to 40 percent of total loans. however. However.A. However. although data is not readily available on the uses of these loans. construction and real estate. an important share of these loans might be for securities investments. One mitigating factor. respectively. See Mansur and Delgado (2008). Two of the largest investment companies. similar to other GCC countries. where despite improvements. . is that household loans are largely extended to those with a salary assignment. corporate governance and transparency are still modest. Additionally.18 stressed domestic investment companies have put strains on the banking sector during the current crisis. which account for 26. concentration of credit to high net worth individuals could pose risks. but are in the process to negotiate or have successfully completed debt restructuring agreements. 20. However. Household loans in turn are well diversified with no dominating sub-sector.16 This could be a potential risk due to risk concentration and the difficulty arising from monitoring margin lending. GCC central banks do not report bank lending for equity purchases separately. Trade is also an important sector in bank loans accounting for 13 percent of total loans. This has posed important risks to Omani banks historically: banks’ asset quality deteriorated in 2000–02 due to the financial troubles faced by large corporate clients to which most banks were exposed. personal loans in GCC countries might have been used for this objective. similar to the rest of the GCC countries. The exposures are mostly to family-owned businesses. a high proportion of the corporate loan portfolio is in a handful of large exposures. have already defaulted on some or all of their debt (the events occurred in January and May 2009). Oman’s banking sector is highly exposed to the household sector. The banking sector is highly exposed to the construction sector and the highly speculative real estate sector (25 percent of total loans. excluding household mortgages). Except for Kuwait. The loan portfolio appears well diversified with respect to the corporate sector with trade being the main sector at 25 percent of total loans (mirroring the structure of the economy).E. some margin lending for equities could be a source of risk.

raising their CAR to 17. however. while their Tier 1 capital to RWA stood at 17. was the lowest among the GCC countries in 2008 at 13. although they have declined significantly in recent years as a result of rapid credit growth and increasing leverage.A.3. FINANCIAL SOUNDNESS Capitalization The banking sectors in the GCC countries are well capitalized across the board with capital adequacy ratios (CAR) well above minimum CARs (Table 4). corporates by major rating agencies. banks have received capital injections by the government in 2009.6 percent by June 2009 and making them among the best capitalized in emerging markets.9 percent in 2008 (versus 17 percent in 2007). and to 12 percent. 2010. Risks to capital adequacy. Islamic retail banks’ CARs stood at very high levels as well with a CAR of 22 percent and Tier I capital of 24. 2009. 17 Currently.17. In 2008. which accounts for around two-thirds of total loans. effective September 30. the profitability of the banking sectors have been affected by the higher provisioning requirements related to the crisis. For Islamic wholesale banks. 19 18 . U. impacting the ability of banks to increase capital internally. Financing. At end of November 2009. 11 percent in the UAE. Financial Stability Report). Standard and Poor’s downgraded several Dubai government related entities as a result of a plan to restructure debt by Dubai World. the minimum regulatory CAR is 8 percent in Saudi Arabia. The U. to become effective June 30. Conventional wholesale banks held a CAR of 19. while their Tier 1 capital to RWA still stood at a comfortable 10. the locally incorporated retail banks held the lowest CAR at 18. exist as the fallout from the crisis on the asset quality of banks continues to unfold. The CAR of the banking sector in the U. VI.E has raised its minimum CAR in response to the current crisis from 10 percent to 11 percent. However.A.A.A.1 percent in 2008 (versus 21 percent in 2007).E. however. In Bahrain. and 12 percent in Bahrain and Kuwait.18 The high capitalization levels of the banking sectors is related to high profitability. the CAR was also robust at 25 percent in 2008 (Central Bank of Bahrain. is mainly directed to large private business groups or governmentowned related enterprises and there is currently a high level of concentration of credit risk due to large financings of a few family-owned businesses and sizeable government-related entities. as regard to the different categories of banks.E. declining significantly from 2005 when it stood at 17 percent. in addition to the risk of credit rating downgrades of U.3 in 2008 (versus 16 percent in 2007).4 percent.19 The latter could impact banks’ CARs through the valuation of risk weighted assets.E. and comfortable leverage ratios by international comparisons. 10 percent in Oman and Qatar.19 is concentrated in the corporate sector.3 percent (versus 19 percent in 2007).

1 … … 2.6 … … 113.9 4.5 24.9 17.9 21.9 27.1 14.5 22. 2008 data for Kuwait is as of September 2008.0 2.6 25.5 95.8 8. September for Qatar (except for the provisioning rate.9 2. 1/ Data for Bahrain reflects the retail banking sector only.2 97.7 21.6 5.7 13.9 16.7 142. 2003-08 1/ 2003 Capital Adequacy Ratio Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates Capital to Assets Bahrain Kuwait Oman Saudi Arabia United Arab Emirates Return on Equity NPLs to Total loans Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates Provisions to NPLs Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates ROA Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates ROE Bahrain Kuwait Oman Qatar Saudi Arabia United Arab Emirates 23.3 19.7 107.7 2.0 … 4.0 21.6 21.0 … … 2.5 20.6 94.4 7.4 28.20 Table 4.7 14.5 38.8 2.3 2.6 8.3 67.3 22.4 27.1 Source: Country authorities.3 1.0 82. 2009 data is as of June for Oman.8 17.8 27.5 2.8 20.7 17.0 6.0 11.1 3.3 15.0 0.8 11.E.9 2.1 3.1 1.8 11.9 100.2 13.4 128.5 15.3 11.0 2.8 17.5 22.4 … 12.9 8.3 … 11.3 3.6 15.5 … … 14.6 14.5 87.2 1.3 68.7 2.0 92.7 15.2 43.8 5.1 5.1 16.2 3.0 … 12.4 14.9 8.3 2.0 13.4 18.2 20.8 2.7 4.1 3.7 18. and November for the U.7 127.6 28.5 21.3 85.0 182.8 12.3 18.2 9.9 … 10.5 15.3 18.4 2008 18.8 12.7 78.2 2.5 1.2 2.0 18.1 16.0 1.0 2.2 1.2 2.8 95.8 12.6 2009 … … 15.3 98.0 6.3 3.6 1.2 20.4 2.0 7.7 13.3 17.2 2.7 8.7 2.8 31.4 94.0 4.4 84.0 14.2 3.A.9 13.0 84.8 109.5 4.1 2007 21.0 2.6 … … … … … 10.9 74.2 1.7 … 18.6 24.3 3.8 2.1 12.4 18.6 2.3 4.7 12.9 16.3 6.4 2.3 3.9 2.8 16.3 16.3 83.2 2.4 4.0 18.9 9.8 90.1 9.3 18.2 88.7 … 12.4 17.5 22.0 1.6 2.1 12.2 2.1 17.4 2.7 77.5 68.3 30.4 28.3 202.8 … … 79.6 … 11.3 3.8 3.6 5.1 2.8 18.1 2.4 (Percent) 2004 2005 25.0 111.3 11.0 84.6 175.3 67.4 2006 22.3 103.6 … 1. which is for end-2008). GCC: Financial Soundness Indicators.5 10 10.8 25.9 15.1 20.1 87.5 1.1 26.8 20.2 2.9 … 12.0 14.2 153.5 2.8 17. .

NPLs stood at low levels in 2008 by international comparisons despite the crisis. when it was at double digits. However. Net interest margins represent the main source of income. 21 The impact.3 percent. and possibly 2010. Dubai World owns two subsidiaries. conventional retail banks had the lowest NPL ratio at 2. however.5 in 2007). the recent announcement by Dubai World— one of the three major Government-related holding companies in Dubai—on seeking a debt standstill and restructuring could have an important impact on U. The high concentration on lending to large business groups is also an issue as indicated by the recent default of two prominent Saudi conglomerates. and in systems that have significant concentration in construction and real estate. in addition to Saudi banks’ exposure to these two groups. In addition to profitable subsidiaries such as Dubai Ports. although the underlying trend is masked by the high credit growth rate during this period. ranging from 53 percent of gross operating income in Qatar in 2008 to 80 percent in Saudi Arabia (Figure 11). Additionally.A. mainly real estate. which are engaged in mega real estate projects.2 for the wholesale conventional (versus 2.20 There are. Wholesale banks’ NPL ratio increased in 2008 with a ratio of 3. while the Islamic wholesale banks had the highest NPL ratio at 4. Investment losses mostly affected Saudi and Bahraini banks. losses from investments in securities in addition to increasing provisions have weighed on banks’ operating profits in 2008-2009 across the GCC (Figures 12–13). however. Dubai World announced on November 25. This risk is heightened in countries with the highest credit growth rates prior to the crisis. as these sectors have been hit hard throughout the GCC. These have been affected significantly by the tightening of global financial conditions and the bursting of the real estate bubble in Dubai in late 2008. Nakheel and Limitless. (Central Bank of Bahrain.2 percent. The ratio of nonperforming loans (NPLs) to total loans has been on a declining trend since 2003.5 in 2007) and 4. continued risks of a possible worsening of asset quality as the fallout from the crisis continues to materialize on banks’ balance sheets. Dubai World is a Government-related holding company and is fully owned by the Dubai Government. banks and other GCC banks that have exposure to this group. a number of GCC banks also had significant exposures. Returns on equity (ROE)—hovering around 20 percent—and As regard to the different categories of banks in Bahrain.E. the supervisory authorities in the GCC have required banks to take substantial general loan loss provisions in anticipation of rising amounts of NPLs in 2009. The coverage ratio of provisions to NPLs across the GCC is very high by international standards.2 for the Islamic (versus 3. while loan loss provisioning affected Kuwaiti banks most. Profitability The banking sectors in the GCC have stable sources of earnings from traditional banking. 21 20 . is still unclear pending the conclusion of the debt restructuring process.21 Asset quality The asset quality of GCC banks has improved significantly over the past five years. 2009 that it will seek a debt standstill and restructuring on debt related to parts of its business. Financial Stability Report). Notwithstanding.

suffered significant losses in 2008 on account of customerrelated foreign exchange derivatives transactions. The wholesale banking sector in Bahrain was also hit significantly as a result of the crisis. It is also worthwhile noting that Qatari banks have the most diversified income within the GCC with net interest margins contributing with 50 percent. it was negatively affected by global and domestic developments in the first half of 2009. Provisions could also potentially rise in relation to exposures to Dubai World. respectively) as a result of impairments to their investment portfolios in advanced economies. Gulf Bank. and investment income constitute the rest. In the U.1 billion and $0. In view of limited global linkages. with Bahrain and Oman being the least profitable. Together with Saudi Arabia. up from 4 percent in 2007). the third largest bank in Kuwait. Islamic retail banks in Bahrain continued to be very profitable (with an ROA of 5 percent. Banks have also had significant government support that helped reduce their losses. the banking sector in Kuwait has been one of the most profitable within the GCC in recent years. 24 23 22 . FX income.6 percent in 2007 (Central Bank of Bahrain.22 returns on assets (ROA) stood at comfortable levels by international comparisons. The bank was recapitalized through a combination of capital injections by shareholders (68 percent) and the government (32 percent) via the Kuwait Investment Authority (KIA)..1 percent compared to an ROA of 0. Wholesale banks suffered an overall net loss in 2008 with an ROA at -0. Financial Stability Report).E.23 The retail banking sector in Bahrain has been the least profitable in the region in the last few years and returns have further suffered in 2008 and 2009. the government purchased equity and real estate assets of banks up to $6 billion (6 percent of GDP) during the first half of 2009. more recent data indicate that while bank profitability increased in 2008. the economy (and consequently banks) have been least affected by the global crisis due to the thriving gas sector. although the latter has been affected relatively more by the current crisis (Figure 13). Gulf International Bank and Arab Banking Corporation derived massive losses ($1. While the Qatari economy is more open. ROA and ROE data for Kuwait is for Q32008 and therefore does not reflect higher provisions incurred in Q4 2008.9 billion.22. Profitability is likely to be further jeopardized by increasing provisions due to the continuing slowdown in economic activity and the bursting of the real estate bubble.24 On the other hand. while banking fees and commissions.A. the Oman banking sector has been little affected by the global crisis.

2005. 120 100 80 60 40 20 0 -20 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2008 2009 2008 2009 120 100 80 60 40 20 0 -20 2005 2006 2007 Qatar 2008 2009 Kuwait Saudi Arabia 120 100 80 60 40 20 0 -20 Net interest income FX income Fees & Commissions Investments income Source: Banks' annual and quarterly reports from Zawya.23 Figure 11.E. .A. and authors’ estimates.Q1 2009 (In percent of gross income) Bahrain 200 150 100 50 0 -50 -100 2005 2006 2007 Oman 120 100 80 60 40 20 0 2005 2006 2007 2008 2009 120 100 80 60 40 20 0 2005 2006 2007 U. GCC: Income Analysis of GCC Banks.

and Fund staff estimates. GCC: Change in Bank Profitability 2007-2009 (In percent) 40 20 0 -20 -40 -60 -80 Bahrain Kuwait Oman Qatar Saudi Arabia Abu Dhabi Dubai GCC 2008/2007 Q3 2009/Q3 2008 40 20 0 -20 -40 -60 -80 Source: Kamco Research. and Authors' estimates.E. 2005-Q1 2009 (As percent of gross operating income. Figure 13. 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Provisions Investment income Sources: Banks' annual and quarterly reports from Zawya. GCC: Banks' Provisions and Investment Income. .A. excluding investment income) Bahrain 40 30 20 10 0 -10 -20 -30 -40 -50 -60 60 40 20 2005 2006 2007 2008 2009 0 -20 -40 -60 -80 2005 2006 Kuwait 2007 2008 2009 Oman 25 20 15 10 5 0 -5 -10 -15 60 50 40 30 20 2005 2006 2007 2008 2009 10 0 -10 2005 2006 Qatar 2007 2008 2009 Saudi Arabia 15 10 5 0 -5 -10 -15 -20 -25 -30 30 25 20 15 10 5 0 -5 -10 -15 -20 U.24 Figure 12.

and authors' estimates. received the bulk of these Source: Bankscope. inflows as indicated by the significant rise in its liquidity ratios in 2007. indicators show that liquidity conditions have returned to their 2006 levels or even above by March 2009. entities. which increased fourfold since 2003 peaking to $103 billion in September 2008 (Figure 14). inflows reversed. dollar billions) Kuwait 35 30 25 20 15 10 5 0 0 Mar-03 Dec-03 Sep-04 Jun-05 Mar-06 Dec-06 Sep-07 Jun-08 Mar-09 Source: BIS Consolidated Banking Statistics.A. Figure 16.E. (In U. The majority of the issuances were by Bahrain. Liquidity was 140 squeezed further following Lehman’s 120 collapse in September 2008. 180 160 140 120 100 80 60 40 . GCC: Banks' External Financing 1/ 35 30 25 20 15 10 5 Bahrain Oman Saudi Arabia Qatar U. Figure 15.E. The Short-term assets to customer and short term funding U. Saudi Arabia. and U.A.E. 2007 (In percent) 80 70 60 50 40 30 20 Liquidity peaked in GCC countries in 10 2007 reflecting the inflow of capital in 0 speculation of an appreciation of GCC currencies (Figures 16–17).E. GCC banks had become increasingly reliant on external financing. Narrow and broad liquidity Sources: GCC central banks. The 100 injection of liquidity by the GCC 80 authorities via central bank repos and 60 direct placements of government deposits restored liquidity conditions 40 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 quickly. December 2007=100 Liquidity conditions started to tighten 180 Bahrain Kuwait in early 2008 as speculative capital Oman Qatar 160 Saudi Arabia U.25 Liquidity Liquidity in the GCC banking sector has been severely squeezed in 2008 with the reversal of speculative foreign deposits and tight liquidity in international capital markets. Liquidity ratios for all countries ranked on the low side by international comparisons.A. Figure 14. GCC: Commercial Banks' Reserves with Central Bank. Banking Sector Liquidity in Selected Countries. 1/ Includes foreign currency interbank lending extended by foreign bank branches in GCC countries.A. reflecting the relatively high asset/liability maturity mismatches in GCC banks (Figure 15).S.

. Narrow liquidity ratio is calculated as cash and reserves at the central bank to total liabilities. reserves at the central bank. and securities holdings as a share of total liabilities.26 Figure 17. The broad liquidity ratio is calculated as cash. Liquidity Indicators of GCC Banking Sectors 16 14 12 10 8 6 4 2 0 2005 40 35 30 25 20 15 10 5 0 2005 35 30 25 20 15 10 5 0 2005 2006 2007 2008 Mar-09 Kuwait Bahrain Saudi Arabia Qatar Oman 2006 2007 2008 Mar-09 Kuwait Saudi Arabia Bahrain UAE Oman Qatar 2006 2007 2008 Mar-09 Qatar Kuwait Oman Bahrain Saudi Arabia Liquidity Ratio (Narrow) UAE Liquidity Ratio (Broad) Liquid Assets to Short-Term Liabilities UAE Source: Banks' Annual and Quarterly Reports and authors' estimates.

as these sectors have been hit hard throughout the GCC. along with a worsening of banks’ asset quality and strains on their liquidity. our analysis indicates some weaknesses associated with the operational aspects of GCC banks and the characteristics of the GCC economies. There are.27 VII. First. These would typically be associated with a slowdown in economic activity and massive layoffs of expatriate workers. both in the context of lending to a few obligors and large exposures to sectors that are highly subject to market price fluctuations and asset bubbles (such as real estate and equities). International experience indicates that rapid credit growth in periods of high real economic growth is likely to result in high levels of asset impairment once economic conditions reverse. The banking sectors in the GCC countries continue to be well capitalized across the board with capital adequacy ratios well above minimum standards and comfortable leverage ratios by international comparisons. Second. liquidity management practices in GCC banks in general would need to be evaluated. the increasing dependence of banks on external financing in some GCC countries in recent years has increased banks’ vulnerability to external credit conditions. household defaults could pause risks. Additionally. however. As indicated above. there are issues that need to be addressed in relation to banks’ asset management practices. Policy makers are encouraged to evaluate policy measures that could dampen the impact of oil prices on economic activity and the financial sector. These would need to be evaluated and addressed by GCC policy makers. Third. Notwithstanding the general soundness of GCC banks. some GCC countries witnessed rapid credit growth in the oil boom period preceding the financial crisis. While household lending in the GCC is generally secured by borrowers’ salaries. risks of a possible worsening of asset quality as the fallout from the crisis continues to materialize on banks’ balance sheets. Furthermore. CONCLUSIONS AND POLICY IMPLICATIONS The moderate impact of the global financial crisis on the GCC banking sectors has generally demonstrated the soundness of these systems. This linkage presents risks and introduces significant liquidity volatility for banks. This was demonstrated in the current crisis as banks’ liquidity was squeezed with the tightening in global liquidity conditions. While the banking sector in the GCC still relies on relatively stable deposits as the main source of funds. GCC banks generally have significant concentration risk. This risk is heightened in countries with the highest credit growth rates prior to the crisis. the fact that banks continue to have a very small share in bond financing complicates banks’ ability to manage the maturity mismatches between assets and liabilities. sharp declines in oil prices have brought about a slowdown in economic activity. GCC banks appear to maintain low liquidity levels by international comparison. and in systems that have significant concentration in construction and real estate. As observed in the current crisis. . some GCC banking systems have high exposures to households. this rise in available bank liquidity and the consequent increase in lending rates have been indirectly associated with higher oil prices.

LIST OF COMMERCIAL BANKS IN GCC COUNTRIES Table 1.28 APPENDIX I. Bank Melli Iran National Bank of Abu Dhabi Bank Saderat Iran State Bank of India Bank of Beirut Qatar National Bank . GCC: List of Commercial Banks in GCC countries (2008) Local Banks Kuwait Bahrain Oman Ahli United Bank Bahrain Development Bank Bahraini Saudi Bank BBK BMI Bank Eskan Bank Future Bank National Bank of Bahrain Oasis Capital Bank Al Baraka Islamic Bank* Al-Salam Bank –Bahrain* Bahrain Islamic Bank* Khaleeji Commercial Bank* Kuwait Finance House* Shamil Bank of Bahrain * National Bank of Kuwait Kuwait Finance House* Gulf Bank KSC Commercial Bank of Kuwait Al Ahli Bank of Kuwait Burgan Bank SAK Bank of Kuwait & The Middle East Kuwait International Bank* Boubyan Bank* National Bank of Oman Oman Arab Bank Oman International Bank Bank Muscat Bank Dhofar Bank Sohar Ahli Bank Foreign Banks Arab Bank plc BNP Paribas Credit Libanais Citibank HSBC Bank Middle East Limited Habib Bank ICICI Bank MashreqBank psc National Bank of Abu Dhabi National Bank of Kuwait Rafidain Bank Standard Chartered Bank State Bank of India The Housing Bank for Trade and Finance United Bank Limited Bank of Bahrain and Kuwait BNP Paribas HSBC Bank Middle East Limited National Bank of Abu Dhabi Citibank Qatar National Bank Doha Bank HSBC Bank Middle East Standard Chartered Bank Habib Bank Ltd.

Qatar National Bank Commercial Bank of Qatar Doha Bank Qatar Islamic Bank* Ahli Bank International Bank of Qatar Masraf Al Rayan* Qatar International Islamic Bank* Al Khalij Commercial Bank National Commercial Bank Samba Financial Group Al Rajhi Bank* Riyad Bank Banque Saudi Fransi Saudi British Bank Arab National Bank Saudi Hollandi Bank Saudi Investment Bank Bank Al-Jazira Bank AlBilad* Alinma Bank* National Bank of Abu Dhabi Abu Dhabi Commercial Bank Union National Bank The National Bank of Dubai Commercial Bank of Dubai Dubai Islamic Bank* Emirates Bank International Emirates Islamic Bank Mashreq Bank* Sharjah Islamic Bank Bank of Sharjah United Arab Bank The National Bank of Ras-Al Khaimah Commercial Bank International National Bank of Fujairah National Bank of Umm-Al Qaiwain First Gulf Bank Abu Dhabi Islamic Bank* Dubai Bank* Noor Al Islam Bank* Al Masraf Invest Bank Al Hilal Bank* Foreign Banks Arab Bank Limited Mashreq Bank HSBC Bank Middle East Gulf Bank Saderat Iran Bank United Bank Standard Chartered Bank Emirates Bank National Bank of Kuwait Deutsche Bank BNP Paribas National Bank of Kuwait Bank Muscat National Bank of Bahrain Rafidain Bank Arab Bank Banque Du Caire El Nillien Bank National Bank of Oman Calyon-Corporate Bank of Baroda BNP Paribas Janata Bank . continued) Local Banks Qatar Saudi Arabia U.E. GCC: List of Commercial Banks (2008.29 Table 1.A.

30 Table 1. GCC: List of Commercial Banks (2008.E. Al Ahli Bank of Kuwait Barclays Bank Habib Bank Habib Bank AG Zurich Standard Chartered Bank CitiBank Bank Saderat Iran Bank Melli Iran Blom Bank France Lloyds TSB Bank PLC ABN Amro Bank United Bank Doha Bank Samba Financial Group Source: GCC central banks. HSBC Bank Middle East Arab African International Bank Banque Libanaise Pour Le Commerce (France) S.A. concluded) Foreign Banks Qatar Saudi Arabia U. .A. Notes: *Islamic bank.

0 12.3 Table 3.5 45.0 7.5 10.5 40. 2007 (In percent) Bank name Bank of Bahrain and Kuwait National Bank of Bahrain Ahli United Bank Shamil Bank of Bahrain* Kuwait Finance House* Bahrain Islamic Bank* Future Bank Al-Salam Bank* Albaraka Islamic Bank* Khaleeji Commercial Bank* Bahraini Saudi Bank Source: Authors' estimates.0 11.4 4.1 65.4 Cumulative share of total assets 19. 2008).0 7. and authors' estimates.0 93.0 51.0 Cumulative Share of Total Assets 40.0 Source: Moody’s Kuwait Banking System Profile (April.9 64.5 9.4 2.0 74.2 88.5 58. Table 4.1 49.31 APPENDIX II.0 3.1 85.0 22.0 2. Kuwait: Concentration of the Banking Sector.0 30.0 Cumulative share of total assets 29.3 4. . Share of total assets 19. Notes: * Islamic bank.8 55.0 91.8 81.2 6.0 2.5 56. Oman: Concentration of the Banking Sector. Central Bank of Oman. Share of total assets 29.5 53. CONCENTRATION OF THE BANKING SECTOR Table 2.0 88.0 11.9 61.3 62.3 10.0 81. 2008).2 Sources: Moody’s Oman Banking Statistical Supplement (July.1 3.6 1.6 4.0 3.4 1.8 14. Bahrain: Concentration of the Banking Sector. Notes: * Islamic bank.0 63.0 4.6 74. 2007 (In percent) Bank Name BankMuscat National Bank of Oman Oman International Bank Bank Dhofar Oman Arab Bank Bank Sohar Ahli Bank Share of Total Assets 40. 2007 (In percent) Bank name National Bank of Kuwait Kuwait Finance House* Gulf Bank Commercial Bank of Kuwait Burgan Bank AlAhli Bank of Kuwait Bank of Kuwait and the Middle East Boubyan Bank Notes: * Islamic bank.

6 11. and authors' estimates.8 4.4 1.1 83. 2007 (In percent) Bank Name National Commercial Bank Samba Financial Group Al Rajhi Bank* Riyadh Bank Banque Saudi Fransi Saudi British Bank Arab National Bank Saudi Hollandi Bank Saudi Investment Bank Bank Al-Jazira Bank AlBilad* Notes: * Islamic bank. Qatar: Concentration of the Banking Sector. Notes: * Islamic bank. .1 8.3 7.5 57.3 9.9 90.0 1.0 75. Saudi Arabia: Concentration of the Banking Sector.4 56.3 92.4 14.9 88.0 3. 2007 (In percent) Bank Name Qatar National Bank Commercial Bank of Qatar Doha Bank Ahli Bank Qatar Islamic Bank* International Bank of Qatar Masraf Al Rayan* Qatar International Islamic Bank* Al Khalij Commercial Bank Source: Authors' estimates.6 92.7 10.0 Table 6.7 3.9 96.7 Cumulative Share of Total Assets 37.4 72.7 79.4 Sources: Moody’s Saudi Arabia Banking System Profile (July.4 86.2 67.4 11.5 3.7 83.8 45.7 66.32 Table 5.9 94.3 9. 2008). Share of Total Assets 37.7 4.5 19.5 Cumulative Share of Total Assets 19.4 33. Share of Total Assets 19.2 5.3 2.

1 9.6 72 75.3 6. 2007 (In percent) Bank name National Bank of Abu Dhabi Emirates Bank International Abu Dhabi Commercial Bank National Bank of Dubai HSBC Middle East First Gulf Bank Mashreqbank* Dubai Islamic Bank* Union National Bank Abu Dhabi Islamic Bank* Commercial Bank of Dubai Dubai Bank* National Bank of Ras Al-Khaimah Notes: * Islamic bank Share of Total Assets 11.1 4.9 61.E.5 1.2 22.33 Table 7.8 39. and authors' estimates.: Concentration of the Banking Sector. U.5 8 7.6 54.1 80.9 79.A.6 6. 007).4 3.8 47.3 31.2 11.1 Source: Moody’s Saudi Arabia Banking System Outlook (December.2 1 Cumulative Share of Total Assets 11. .5 67.8 7.4 77.4 2.

and authors' estimate.2 10.3 35. Kuwait: Ownership Structure of the Domestic Banking Sector (2007) (In percent) Bank name Gov.0 100.0 10.E.0 33. OWNERSHIP STRUCTURE OF GCC DOMESTIC BANKS Table 8.8 5.0 4.8 2/ 65. 2/ The Kuwaiti government owns 9%.A.0 Sources: Bankscope.7 1/ 48.0 100.0 4.0 Non-GCC Royal Family Table 9.0 84.0 12. Bankers’ Almanac.0 Non-GCC Royal Family 49. and authors' estimate. 3/ Represents share of different private corporations from the U. and the remainder (66. Quasi Gov. 4/ Part of Albaraka Banking Group (Saudi Arabia). that are owned by Sheikh Mohammed bin Rashid Al-Maktoum.1 51.0 51.0 86. Bahrain: Ownership Structure of the Domestic Banking Sector (2007) (In percent) Gov. 49.0 100.6%) is owned by Bank Mellin Iran and Bank Saderat in Iran.0 4/ 57.0 .0 33.5 100.0 100. Notes: * Islamic bank. 1.3 5/ 66.34 APPENDIX III.0 76.1 6.5 62. while the remaining shares are owned by a royal family member from Kuwait. Bankers’ Almanac. Quasi Gov. Private Domestic 62.9 100.3%.0 100.0 94.0 50.0 3/ 50. 5/ Ahli United bank owns 33.8 19.5 32. 1/ Quasi-government entities from both Kuwait and Qatar own 21%. Notes: * Islamic banks.6 5/ Foreign GCC Ahli United Bank Bank of Bahrain and Kuwait National Bank of Bahrain Shamil Bank of Bahrain* Bahrain Islamic Bank* Al-Salam Bank Bahrain* Albaraka Islamic Bank* Khaleeji Commercial Bank* Bahraini Saudi Bank Kuwait Finance house* Future Bank 5/ Sources: Bankscope.1 26.0 42. Private Domestic Foreign GCC National Bank of Kuwait Kuwait Finance House* Gulf Bank Commercial Bank of Kuwait Al Ahli Bank of Kuwait Burgan Bank Bank of Kuwait & The Middle East Kuwait International Bank Boubyan Bank 20.

Table 11.1 Non-GCC 25.0 100. 2/ Represents the share of Ahli United Bank in Bahrain. Quasi Gov.0 60. Quasi Gov.0 70.0 100.1 24.0 16.0 2/ 49.0 70. Bankers’ Almanac. and authors' estimates.7 48.0 72.0 100.0 100.7 42.2 23.0 50. Private Domestic Foreign GCC Qatar National Bank Commercial Bank of Qatar Doha Bank Qatar Islamic Bank* Ahli Bank International Bank of Qatar Masraf Al Rayan* Qatar International Islamic Bank* Al Khalij Commercial Bank 18.5 14. Private Domestic Foreign GCC Bank Muscat National Bank of Oman Oman International Bank Bank Dhofar Oman Arab Bank Bank Sohar Al Ahli Bank 14.0 10. and authors estimates. Qatar: Ownership structure of the Domestic Banking sector (end-2007) (In percent) Bank name Gov.0 1/ 30. 1/ Represents the share of Ahli United Bank from Bahrain.0 35.0 2/ Non-GCC Royal Family Sources: Bankscope.0 19.9 10. Oman: Ownership Structure of the Domestic Banking Sector (2007) (In percent) Bank name Gov.9 63. Notes: * Islamic bank.0 50.0 10.35 Table 10.0 27. Bankers’ Almanac.0 Royal Family Sources: Bankscope. 2/ Represents the share of National bank from Kuwait. .0 1/ 15. 1/ Represents the share of Arab Bank PLC incorporated in Jordan.0 100.0 40.0 50.1 89.8 7.0 34.

0 22.2 100. 6.0 73.8 9.0 95.0 31.0 5.5 30.4 53.0 15.6 49.0 15.0 20. and authors' estimates.8 94. 70. 1/ Emirates Bank International and National Bank of Dubai completed merger on 17-10-2007 to become Emirates NBD.0 10.1 50. Saudi Arabia: Ownership Structure of the Banking Sector (2007) (In percent) Bank name National Commercial Bank Samba Financial Group Al Rajhi Bank* Riyadh Bank Banque Saudi Fransi Saudi British Bank Arab National Bank Saudi Hollandi Bank Saudi Investment Bank Bank Al-Jazira Bank AlBilad* Source: Bankscope.6 38.0 12.0 68.2 56.5 53.0 27.8 14.0 80.4 5. Private domestic 23.5 9. which is owned by Sheikh Mohammed bin Rashid Al Maktoum 4/ Through the share of government in Emaar properties. Bankers’ Almanac.0 3.9 40.0 60. 10.0 90.3 20.0 15.0 Quasi gov. Bankers’ Almanac.8 Private domestic GCC 20. . 2/ Abu Dhabi Ruling Family.0 17.0 Gov.0 30.5 70.0 58.8 9. 3/ Represent the share of Dubai holding LLC.9 70. United Arab Emirates: Ownership Structure of the Banking Sector (2007) (In percent) Bank Name Emirates Bank International 1/ National Bank of Abu Dhabi Abu Dhabi Commercial Bank National Bank of Dubai Mashreqbank* Dubai Islamic Bank* First Gulf Bank Union National Bank Abu Dhabi Islamic Bank* Commercial Bank of Dubai Emirates Islamic Bank National Bank of Fujairah Commercial Bank International National Bank of Ras Al-Khaimah Dubai Bank* Sharjah Islamic Bank Bank of Sharjah National Bank of Umm Al Qaiwain 60.3 12.0 54.0 65.0 77.0 100.0 35. These two banks offer only Islamic banking products. Notes: * There is no Islamic bank license in Saudi Arabia and most banks offer a combination of conventional and Islamic banking products.5 10.0 20.0 46.0 52. and IMF staff.0 Quasi gov.8 2/ Foreign GCC Non-GCC Royal family United Arab Bank 68.0 23.8 Foreign Non-GCC 3.0 21.0 11.0 40.9 7.5 Royal family Table 13.2 50.0 64.0 23. since Emaar owns 30 of Dubai Bank.4 86.7 4/ 27. 77.0 Source: Bankscope.36 Table 12.0 39. Notes: * Islamic bank.0 40.9 43.1 50.0 52.5 Gov.0 4.8 9.1 39.0 3/ 29.

281 281 3. 25 2006 1.140 1.793 3.276 4. & Shareholders' Equity 1/ Based on data for listed banks only. Bahrain: Balance Sheet of the Banking Sector 1/ (USD 000) 2005 Assets Cash & Reserves at CB Loans Securities Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab. Bahrain: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Income Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Tot.115 14. 1.469 765 5. Non Interest Income Total Operating Income Operating Expenses Provisions Operating Profit Net Non-Operating Income (Expense) Other Expenses Net Profit Before Taxes Net Profit After Taxes 1/ Based on data for listed banks only.361 183 10.052 2.067 4.752 38. and authors' estimates.793 2.730 40. and authors' estimates.125 33.900 819 4.027 169 18 -103 219 468 -327 -52 405 2 -23 355 318 Source: Banks' Annual and Quarterly Reports. 2005–0925 Table 14.379 785 131 2.137 1.502 23.029 3.150 5.186 -1.675 26.049 318 6 -53 395 821 -619 -52 717 0 0 581 366 2008 2009 (Q 1) 1.316 22.707 2.473 38.240 32.096 11.361 428 8.423 162 5.707 3.042 398 9.458 1.715 -813 902 237 11 -192 257 622 -449 -55 524 0 0 417 280 2007 2.341 27.398 22.359 278 4.403 5.901 216 4.705 2.949 35.349 20.074 40.945 5.808 850 230 3.310 778 3.157 2.032 -5 1.060 5.102 32.731 2.203 6.752 18.214 23.336 1.052 2006 2007 2008 2009 (Q1) Sources: Banks' Annual and Quarterly Reports from Zawya.782 14.37 APPENDIX IV: BANKS AGGREGATED FINANCIAL STATEMENTS.983 23.410 330 9.768 5.047 28.781 -931 850 274 0 256 277 786 -651 -170 703 0 0 562 312 391 -9 382 37 0 -132 121 257 -155 -68 205 0 -1 167 112 1.446 41.705 2. . Table 15.334 896 4. Includes conventional and Islamic banks.964 41.949 516 6.812 36.811 20.731 1.

069 -354 5.403 624 25.924 1.245 5.107 2.258 2007 -4.846 903 128 1.426 7.694 75.016 404 1.576 93.612 20.870 88.897 1.703 156.427 0 0 1.38 Table 16.715 79.857 79.554 38.930 890 51. & Shareholders' Equity 1/ Based on data for listed banks only.687 2008 -4.326 558 2009 (Q1) -934 1. Kuwait: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Tot.260 1.810 16.053 152.967 163.027 1.267 3. and authors' estimates.852 72 4.049 14.033 131.148 704 120 809 1.961 2.239 67.789 1.027 2.381 1.548 13. .592 97.587 4.349 3.094 144.245 -2.892 14.827 17.827 4 -4 2.604 7.997 13.446 -2.357 1.236 883 8.314 5.121 -9 404 733 3.133 200 7.056 78.515 10.970 35.879 36.152 53.824 89.569 1.020 245 49 -118 198 939 -592 -153 789 0 0 525 402 Source: Banks' Annual and Quarterly Reports.550 -1.977 4.675 16.761 9.936 2. and authors' estimates.317 1.767 -2.565 1.245 11.172 4.154 50.172 13.936 3.679 2.349 9.973 2.736 156.587 15.915 581 22.532 41.895 137.456 152.879 -988 -421 2.106 53.175 5.369 16.350 9. Kuwait: Balance Sheet of the Banking Sector 1/ (USD millions) 2005 Assets Cash & Bal.260 0 -1 3.528 67.091 103.076 163.722 708 36. -697 3. Table 17.121 61.929 4.154 2006 2007 2008 2009 (Q1) Source: Banks' Annual and Quarterly Reports from Zawya.725 -1 -1 2. with Central Bank Gross Loans & Advances Securities Investments Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab.566 1.508 -422 3. Non Interest Income Total Operating Income Operating Expenses Provisions Operating Profit Net Non-Operating Income (Expense) Other Expenses Net Profit Before Taxes Net Profit After Taxes 1/ Based on data for listed banks only. 2.734 103.058 32.363 2.248 2006 -3.214 9.464 1.154 12.718 4.469 2.

547 869 754 408 2.053 -433 -36 584 -44 0 540 471 2009 (Q1) 431 -135 250 57 11 89 168 418 -150 -20 248 -1 0 247 214 .171 1.961 2.121 17.609 2.39 Table 18.451 23.314 12.285 21.413 15.510 1.996 1.566 26.623 480 3. Table 19.206 3. & Shareholders' Equity 1/ Based on data for listed banks only. 1/ Based on data for listed banks only.183 15.355 90 463 17.640 468 1. and authors' estimates.961 1.008 433 1.551 220 553 27.355 1. 607 -34 404 68 13 8 114 517 -220 -43 253 27 0 280 243 2006 927 -369 558 147 21 38 229 787 -316 -20 451 11 0 462 406 2007 1.128 978 90 338 14.938 14.205 18.666 225 805 26.330 24.333 1.512 455 3.232 393 651 12. Non Interest Income Total Operating Income Operating Expenses Provisions Operating Profit Net Non-Operating Income (Expense) Other Expenses Net Profit Before Taxes Net Profit After Taxes Sources: Banks' Annual and Quarterly Reports.298 55 1.053 173 526 21.968 17.547 1.691 1.066 10.141 11.610 310 1.338 1.681 392 3.919 2006 2007 2008 2009 (Q1) Source: Banks' Annual and Quarterly Reports from Zawya.503 17.265 -514 752 220 33 10 301 1.314 19.202 2.105 -489 616 179 30 31 275 891 -370 1 522 14 -2 534 467 2008 1.755 27.919 1.340 19. and authors' estimates.220 11.996 2. Oman: Balance Sheet of the Banking Sector 1/ (USD millions) 2005 Assets Cash & Reserves at CB Loans Securities Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab. 805 748 330 1.923 13.388 2.510 2.450 449 1.380 2. Oman: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Income Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Tot.711 4.

339 7.480 510 874 -3.574 -401 11.134 2006 2007 2008 2009 (Q1) Sources: Banks' Annual and Quarterly Reports from Zawya.678 195.983 109.824 -5. Qatar: Balance Sheet of the Banking Sector 1/ (USD millions) 2005 Assets Cash & Bal.484 6.548 -47 16.900 102.591 37.538 3.810 -534 -4.264.548 74.187 119 -1.370 444 6. .386 6.603 43.548 11.413 61.761 232.062 8.603 61.966 10.352 -7.509 17.232 774.639 401.997 29.592 16.513 66.257 10.114 41.925 2008 54.483 0 17.733 14.073 134. and authors' estimates.953 9.659 8.932 1.787 101.260 -14.083 324.708 1.259 369.193 590.933 577.067.027 82.126 401.429 4.811 2007 40.169 6.014 53.016 26.115 -3.917 154.149 0 32.844 19.353 -72 -2.523 36. and authors' estimates.818 362.40 Table 20.340 -6.114 486.436 6.390 398.062 346.777 1.371 1.676 207 51.667 6 -2.069.260 3.644 768 20.860 -939 32.902 19.486 590.717 545.229 Source: Banks' Annual and Quarterly Reports.549 1.827 1.462 1.268.226 -6.134 23.513 59.005 -13.554 754.698 76.531 290 93. & Shareholders' Equity 1/ Based on data for listed banks only.600 8.018 861 5.181 10.408 102.161 10.268.525 2009 (Q1) 14.431 29.264.604 722.197 -28.346 5. with Central Bank Gross Loans & Advances Securities Investments Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab. Qatar: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Income Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Operating Expenses Provisions Operating Profit Net Non-Operating Income (Expense) Other Expenses Net Profit Before Taxes Net Income 1/ Based on data for listed banks only.101 923.879 -9.421 11.523 19. 17.387 1.911 6.359 432 200.418 2006 28.721 1.439 15.783 5.278 2.721 923.655 822 224.662 15.392 69 22. Table 21.560 31.353 707.515 54.574 36.479 197.272 6.074 -2.848 -23.070 78. 14.068 62.606 68.027 69.557 221.702 36.815 103.014 64.697 264.771 768.

709 -4.956 6.021 -1. 9.343 2.907 169. Saudi Arabia: Balance Sheet of the Banking Sector 1/ (USD million) 2005 Assets Cash & Reserves at CB Loans Securities Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab.233 -5.638 36.180 73.032 -5.872 26.421 3.049 -535 7.329 80 28.183 2006 13.750 44.911 8.378 4.890 10.192 3.567 52.679 -2.740 174.224 195.579 12.41 Table 22. Saudi Arabia: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Income Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Tot.377 7.604 7. & Shareholders' Equity 1/ Based on data for listed banks and the National Commercial Bank.723 3.866 221.153 12.325 27 -44 4.989 7.668 101. and authors' estimates.333 245.578 68.608 340.483 -467 2.183 28.455 2.171 -893 7.367 3.276 .945 2.059 2008 2009 (Q1) 16.312 67.442 4.222 2006 2007 2008 2009 (Q1) Sources: Banks' Annual and Quarterly Reports from Zawya.263 15 25.678 2 -31 5.944 39.117 1.153 14.437 62.531 30.801 6.899 240.457 13.079 14.467 25.572 -3.512 134.919 3.572 2.755 2.536 26.182 2.919 -5.923 8.473 9.415 195.593 295.953 678 -1.739 14.769 9.019 340.209 120 -42 4.145 -656 8.127 276.236 1.165 47 -29 4. 9.730 4.514 75.949 53.515 14.388 -1.098 1. Non Interest Income Total Operating Income Operating Expenses Provisions Operating Profit Net Non-Operating Income (Expense) Other Expenses Net Profit Before Taxes Net Profit After Taxes Net Income Sources: Banks' Annual and Quarterly Reports.536 25.023 4.300 12. and authors' estimates.359 -2 -15 1.212 294.510 276.872 33.846 82 12.794 251.728 12.403 140.501 8.996 2.159 165.589 -617 9.005 4.454 110.277 161.101 16.027 8.344 4.810 466 9.606 3.461 -3.103 46.904 221.604 4.769 5.441 2007 14.711 30.376 477 25.716 4.183 17.115 341.180 42.632 580 620 2.196 807 166 67 516 2.509 3. 1/ Based on data for listed banks and the National Commercial Bank.038 394 971 3. Table 23.222 15.162 190.946 341.557 7.089 195.969 1.506 15.208 365 403 2.182 1.721 -5.

344 4.643 336 1.041 79.368 201.326 18.003 2.343 1.907 2006 -3.286 4.210 12.362 860 31.057 3.494 4.933 218.593 350 5. and authors' estimates.769 6.938 56.462 30.130 79.823 13.582 -403 5.787 18.266 7.907 23.023 92.136 49. United Arab Emirates: Balance Sheet of The Banking Sector 1/ (USD millions) 2005 Assets Cash & Reserves at CB Loans Securities Fixed Assets Other Assets Total Assets Liabilities Due to Banks Customers Deposits & CD's Bonds Other Liabilities Total Liabilities Minority Interest Shareholders' Equity Paid-up Capital Reserves Retained Earnings/ Accumulated losses Total Shareholders' Equity Total Liab. Table 25.351 48.101 260.198 2006 2007 2008 2009 (Q1) Source: Banks' Annual and Quarterly Reports from Zawya.304 5.359 21.962 16. 3.928 2.263 7.106 126.616 92.587 3.829 40.286 149 511 1.106 -2.656 530 22.787 6.255 295.602 1.301 7.753 1.561 63.886 4.932 2.583 5.970 145. .430 677 -236 2.254 21.42 Table 24. & Shareholders' Equity 1/ Based on data for listed banks only.872 4.233 144.420 2008 -6.030 117.840 2.695 -999 -412 3.400 64.409 4.467 7.257 3.233 291. Non Interest Income Total Operating Income Operating Expenses Provisions Operating Profit Net Profit Before Taxes Net Income 1/ Based on data for listed banks only.508 285 10.878 2.876 8.353 625 7.410 7.847 195.943 2.536 398 28.007 110.713 -1. -1.377 126.011 3.050 1.023 -3.062 5.693 84.467 245.465 2.717 2.834 295.039 2007 -6.789 4.485 10.343 280 32.532 291.467 19.972 8.063 1.335 Sources: Banks' Annual and Quarterly Reports. and authors' estimates.121 16.899 554 68 -104 688 2.870 376 33.540 245.074 33.144 2.725 35.975 65.866 2009 (Q1) -1.087 26.181 145.198 7. United Arab Emirates: Income Statement of the Banking Sector 1/ (USD millions) 2005 Gross Interest Expense Net Interest Income Banking Fees & Commissions FX Income Income from investments Tot.743 4.500 -241 4.377 1.729 37.729 5.011 3.175 2.213 261.483 6.692 -1.645 76.214 3.300 115 857 2.641 1.275 -958 -389 1.

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