After clocking in a 6.4 percent year-on-year (YoY) credit growth in 2016, the GCC banking sector will likely continue to pursue a cautious stance on loan book growth and will only expand it opportunistically, while focus remains on preserving asset quality and maintaining profitability, according to a research note issued by U Capital.
The regional banks’ credit growth peaked in 2012, touching 14.1 percent year-on-year. Since then, credit growth rate has been on a downward trend. However, 2016 saw the fastest decline in credit growth rate.
UAE’s credit growth was hovering above 9 percent YoY for the last 3 years, up from 4.1 percent in 2011 and 6.1 percent YoY in 2012. However, last year, UAE credit growth fell dramatically to 5.6 percent YoY. The second largest market, Saudi Arabia, also saw a dramatic fall in its credit growth in 2016, with growth falling from a high 8.4 percent in 2015 to 1.8 percent in 2016. Saudi Arabia’s credit growth also peaked in 2012 at a whopping 17.9 percent. Qatar, however, skipped the industry wide trend of credit growth decline, and clocked in a whopping 21.5 percent YoY credit growth rate in 2016. Credit growth in Qatar bottomed in 2014 (comparing for 2010 onwards only) at 14.3 percent YoY and has been on the rise since then.
“We believe that the most important factor in credit growth decline is the slowdown in deposit growth as banks’ loan-to-deposit ratios have climbed dramatically”, analysts at U Capital said.—Agencies