Corporate banking divisions at GCC-based banks are at peak levels in terms of revenues and net profits, according to a new study by The Boston Consulting Group (BCG).
The report said that banking performance in the Gulf has even crossed the pre-crisis levels seen in 2008.
“This impressive performance is even more apparent when compared to the same banks’ retail banking divisions, where revenues and net profits have barely touched 2008 levels,” BCG said.
Its Corporate Banking Benchmarking Report compared the performance of Gulf banks with their global rivals and concluded that growth rates were among the highest in the world.
“At 12 percent, this set of GCC corporate banks have witnessed some of the highest growth rates between 2009 and 2011 among all geographies surveyed,” BCG said.
Globally, while banks in Europe are still reeling under pressure in the aftermath of the financial crisis with limited growth or declines in revenues, corporate banking divisions of banks in the GCC, US, Asia, Canada and Australia showed improved performance with high single-digit and even double-digit growth.
However, the GCC’s corporate banks appeared to be lagging behind when compared on the basis of other key matric like return on regulatory capital.
Close to two-thirds of GCC corporate banking divisions are not returning the generally expected 16 percent cost of equity hurdle, the report said.
Markus Massi, partner and managing director, BCG’s regional leader in wholesale banking and capital markets, said: “While banks have been able to increase their revenues and even profits by extending more credit and keeping loan losses in check, they have been limited in their options of diversifying their source of revenues away from standard credit offerings.
“This has led to no real improvement in the return on regulatory capital in spite of increasing revenues,” he said.
Mohammed Turra, principal in BCG’s Dubai office, added: “GCC banks tend to have wider variation in performance as compared to their counterparts in developed markets across almost all key matrices.
“This clearly shows the developing nature of the market and the development stage of individual banks, as we see top performing banks able to pull performance levers in a more superior manner.”
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