KAMCO Research · KAMCO Research April -2019 G anking Sector Report Highlights - G anking Sector This report analyzes financials reported by 66 listed banks in the G for 2018. The

GCC Banking Sector Report

Faisal Hasan, CFA

Head - Investment Research

+(965) 2233 6907

[email protected]

Junaid Ansari

Vice President

+(965) 2233 6912

[email protected]

KAMCO Investment Research Department, 16th Floor, Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq,P.O. BOX : 28873, Safat 13149, Kuwait Tel.: (+965) 1 852 626 Fax: (+965) 2249 2395 Email: [email protected] Website: http://www.kamconline.com

Sound fundamentals continue to support the resilience of GCC Banking sector...

GCC Banking sector continues to boast a strong balance sheet coupled with improving margins as seen

from 2018 financial results. The numbers also show minimal impact from the decline in oil prices which

continue to remain low as compared to pre-crisis levels. A number of factors have contributed to the 7%

CAGR in total assets of listed banks in the GCC over the past five year. These include a robust project

market more than USD 3 Trillion in projects planned or underway, government’s focus on developing the

non-oil sector, low interest rates with central banks resisting passing on all the rate hikes by the US Fed

and lastly the stable economic environment with real growth rates averaging at just over 2% over the past

five years.

In terms of profitability, GCC listed banks have consistently reported higher margins over the past three

years. Net interest margin has grown 10 bps each over the last three years to 3.1% for the aggregate GCC

banking sector although loan-to-deposit ratio has declined over the last two years to reach 81.8% one of

the lowest globally. Despite a decline in the loan-to-deposit ratio, net income grew by 13.2% during 2018

to reach USD 37 Bn. Higher bottom-line came as a result of 7.7% growth in net interest income while non-

interest income grew by 2.4%. Operating expenses as a percentage of total bank revenue also declined by

almost 70 bps during 2018, providing additional support to the bottom-line.

In terms of individual countries, UAE banks reported the largest share of total assets in the GCC at

USD 674 Bn or 31% of the sector closely followed by Saudi Arabia at 28%. In terms of share in net interest

income, Saudi Arabia topped with a third of the total followed by UAE at 29.5%. The Kingdom also boasted

the highest NIM at 3.4% followed by UAE and Kuwait at 3.2% and 3.0%, respectively. In terms of Customer

Deposits, UAE recorded the biggest growth in 2018 at USD 31 Bn or 7% followed by Saudi Arabia at

USD 11 Bn. Nevertheless, the growth in the sector came at the cost of higher bad loans. The Non

Performing Loan (NPL) ratio saw a steep jump during 2018 to reach 8.0% for the GCC (NPL includes bad

loans and loans that are 90-day past due). The increase came primarily on the back of IFRS 9

implementation that did not reflect on NPL numbers for 2017. The sector has also recently seen a number

of consolidations creating larger and more efficient banks. The trend is expected to continue in the future

given the excess capacity with the regional banks with further scope of cost optimization using innovative

services related to banking services.

April - 2019

KAMCO Research

Source : Reuters, Company Financials, KAMCO Research

78.4%

80.7%

84.0%82.6%

81.8%

2014 2015 2016 2017 2018

GCC Banking Sector | Loan-to-Deposit Ratio

2.7%

3.0%

2.9%

2.5%

3.4%

3.2%3.1%

Bahrain Kuwait Oman Qatar SaudiArabia

UAE GCCAggregate

GCC Banking Sector

Net Interst Margin (%)

1,692.31,803.4

1,867.1

2,078.72,153.3

6.6%

3.5%

11.3%

3.6%

2014 2015 2016 2017 2018

GCC Banking Sector | Total Assets (USD Bn)

mailto:[email protected]

http://www.kamconline.com

2

KAMCO Research

April - 2019


Highlights - GCC Banking Sector This report analyzes financials reported by 66 listed banks in the GCC for 2018. The individual banking data has been aggregated to the

country level as there are minimal difference in the countries’ regulatory and supervisory environment. We believe that the charts and

tables adequately capture the nature and structure of the individual

countries’ financial systems, their supervision and their monetary

operations. Some of the key observations from the most recent financial for

the GCC Banking Sector includes the following:

Strong Balance Sheet

The GCC banking sector boasts strong balance sheet support as customer

deposits continued to increase over more than a decade. Total balance sheet

assets of the sector stood at USD 2.2 Trillion at the end of 2018 with earning

assets reported at an average of 86%. Saudi Arabian banks boasted the

biggest banking sector until 2016, however, the UAE has taken over as the

largest banking sector over the last two years accounting for 31% of the total

assets or USD 674.2 Bn. The top 10 banks in the region accounted for 53% of

the total assets for the sector in the GCC. QNB continued to be the biggest

bank in the region with a total asset of USD 236.8 Bn or 11% of the sector as

of the end of 2018 followed by FAB at 9.4% or USD 203 Bn.

Industry consolidating to form bigger better players

Despite rising profitability, the optimal utilization of earning assets was a key issue with GCC banks as seen from the declining loan-to-

deposit ratio over the past two years. In addition, with the economic downturn seen over the past few years led by the decline in oil

prices, banks were finding it increasingly difficult to boost lending and overall revenues. Furthermore, with the next wave targeted at

fintech, banks need to invest in adding capabilities which includes cutting costs by reducing physical presence as seen in the case of

Mashreq Bank. Also, risk weighted exposure with the implementation of IFRS 9 puts further stress on the banking business. Some of the

recent transactions in the banking sector included the recently announced merger of KFH and AUB to create the sixth largest bank in the

GCC, Oman Arab Bank and Alizz Islamic Bank in Oman, Barwa Bank and International Bank of Qatar to form Lusail Bank and Saudi British

Bank and Alawwal Bank in Saudi Arabia.

Positive ‘Jaws’ ratio shows improving efficiency

Cost optimization and efficiency is the key requirements for one of the most overbanked region. With excessive competition and

operating expenses tends to increase in absolute terms that needs to be

justified with a higher increase in income. The ‘jaws ratio’, which is the

difference between increase in income and increase in expenses, helps

measure how banks are expanding their banking revenue base. For the GCC

banks, the ratio remains positive across the six countries but contracted in

2017 primarily due to a steep decline in revenue growth in Qatar and Saudi

Arabia. In 2018, however, the pattern reversed to show strong jaws ratio

across the countries with Qatar and Saudi Arabia leading the growth. Qatari

banks have in fact lowered operating expenses over the past two years.

Islamic vs. Conventional Banks

Both Islamic and conventional banks in the region have shown growth in

assets over the years, although over the past two years, conventional banks

have growth at a slightly faster pace as compared to Islamic banks.

Nevertheless, the 5-year CAGR for Islamic banks was marginally better at 7.8%

as compared to 6.9% for the conventional lenders in the GCC. Saudi Arabia

Bahrain,

6%

Kuwait,

12%

Oman,

4%

Qatar,

19%

Saudi

Arabia, 28%

United

Arab Emirates,

31%

GCC Banking

Sector Assets USD 2.2 Trillion

Conventional,

75%

Islamic,

25%

GCC Banking

Sector Assets USD 2.2 Tln



3

KAMCO Research

April - 2019


Highlights - GCC Banking Sector accounted for the biggest share of Islamic banking assets at USD 168.7 Bn in 2018 followed by UAE at USD 130 Bn. The overall share of

Islamic listed banks in the region’s total banking sector assets has remained almost stable at around 25%.

Improving Yield on Credit

The yield on credit that measures the net return on loans and advances by a bank has shown marginal improvement over the past two

years for the aggregate GCC banking sector. Recorded at 4.8% in 2018, the ratio was the highest in Saudi Arabia followed by Bahrain and

Kuwait at 4.3% and 4.2%, respectively. On the other hand, cost of funds has increased by almost 40 bps during 2018, one of the highest

for the sector over the years.

Impact of IFRS 9 would result in asset quality deterioration

GCC banks are in the process of implementing IFRS 9 that has resulted in the steep jump in NPL across the countries. The NPL ratio for the

aggregate GCC banking sector increased from 5.4% in 2017 to 8% in 2018 with bad loans (including 90-day past due loans) increasing

from USD 73 Bn in 2017 to USD 111.6 Bn in 2018. The ratio is expected to deteriorate if the economy fails to show progress in the near

term as any slowdown would result into higher bad loans and with the new criteria of IFRS 9, loans could quickly fall under the Stage 3

category of impaired loans.

3.3%

2.1%2.4%

4.0%

1.0%

2.0%2.2%


UnitedArab

Emirates

GCCAggregate

GCC Banking Sector | Cost of Funds (%)

4.3% 4.2%

3.3%3.1%

4.8%

4.0% 4.1%


UnitedArab

Emirates

GCCAggregate

GCC Banking Sector | Yield on Credit (%)

41.4 46.162.1

73.0

111.611.4%

34.7%

17.5%

53.0%

2014 2015 2016 2017 2018

GCC Banking Sector | Non-Performing Loans (USD Bn)

Including loans that are 90-day past due

3.8% 3.9%

5.0%5.4%

8.0%

2014 2015 2016 2017 2018

GCC Banking Sector | NPL-Gross Loan Ratio



4

KAMCO Research

April - 2019


Highlights - GCC Banking Sector Improving Cost-to-Income Ratio

Cost efficiency improvement measures implemented by GCC

banks has resulted in a visible improvement in the sector’s cost to

income ratio. The ratio has seen declines over the last two years

and was recorded at 39.4% in 2018, a y-o-y improvement of

70 bps. In terms of country split, Qatar had the lowest ratio at

32.1% while Bahrain and Omani banks were the highest in the

GCC.

Strong credit rating profile

The robust balance sheet of GCC banks along with adequate

coverage ratios resulted in an above average credit ratings for the

sector. The average rating of GCC banks stood at an investment

grade of ’A’, according to our calculations. This also came as a

result of a majority of the countries in the GCC being in the investment grade category. Strong government support to local banks also

resulted in higher credit ratings. Nevertheless, the concentration of lending to specific sectors like Real Estate and to government

initiated projects is a cause of concern for the sector.

Outlook

We see a number of positives for the GCC banking sector that help to mitigate key downside risks. Some of these risks include excessive

exposure to the real estate sector. The real estate sector continues to face challenges, especially in the UAE, due to continued oversupply

and the near term outlook for the sector shows continued downward pressure. In addition, governments continue to be the primary

originator of key projects in the region. With the excessive dependence on oil revenues, the government may prioritize some sectors and

shelve or delay the non-critical ones as seen in 2015 when oil prices reached multi-year lows. Moreover, the implementation of IFRS 9 is

expected to affect the asset quality on an increasing scale over the next couple of years. Banks would have to take rising impairments and

classify higher bad loans. Overall, the economic environment, although expected to marginally improve in the near term, continues to

exert pressure on the banking sector forcing banks to look to other revenue generating opportunities or ways of optimizing costs by

reducing physical presence or merging with other players in the industry.

That said, the positives that tends address some of the aforementioned concerns include the strong balance sheet of the sector that has

comfortably absorbed impairments and bad loans in the recent crisis. On the economic front, GCC countries have drafted a number of

long term plans and are implementing it on an faster pace. The governments have tapped the debt market to fund these projects in light

of declining oil revenues. Some of the near term projects include the Expo 2020 in Dubai and the Fifa World Cup in 2022 in Qatar. These

events have the potential to provide a big boost to the concerned economies and thereby support the banking sector. Also, the implied

government support to banks in the region helps the banks raise debt at relatively better rates as seen from the recent round of bond

issuances. The government and the central banks have also initiated a number of credit boosting measures aimed at reviving the

economies that includes credit guarantee schemes, support to the small and medium enterprises in the region, and the introduction of

bankruptcy law. Furthermore, the introduction of fintech in banking with new payment gateways and increasing digitization should help

in improving margins and profitability in the sector.

39.4%

40.3%

40.5%

40.1%

39.4%

2014 2015 2016 2017 2018

GCC Banking Sector | Cost -to-Income Ratio (%)


5

KAMCO Research

April - 2019


GCC Banking Sector : Total Assets

119.8

121.3

120.2

124.6125.6

1.3%

-1.0%

3.7%

0.8%

2014 2015 2016 2017 2018

BAHRAIN

Total Assets (USD Bn)

233.2 232.0235.9

253.8

264.5

-0.5%

1.7%

7.6%

4.2%

2014 2015 2016 2017 2018

KUWAIT


57.8

68.4 67.3 71.076.2

18.4%

-1.6%

5.5%

7.4%

2014 2015 2016 2017 2018

OMAN


267.7298.1

360.6395.6 408.4

11.3%

21.0%

9.7%3.2%

2014 2015 2016 2017 2018

QATAR


559.3

578.2

590.2 593.0

604.5

3.4%

2.1%0.5%

1.9%

2014 2015 2016 2017 2018

Saudi Arabia


454.5505.4 492.9

640.7 674.2

11.2%

-2.5%

30.0%5.2%

2014 2015 2016 2017 2018

UAE


1,692.3

1,803.41,867.1

2,078.72,153.3

6.6%

3.5%

11.3%

3.6%

2014 2015 2016 2017 2018

GCC Banking Sector | Total Assets (USD Bn)


6

KAMCO Research

April - 2019


GCC Banking Sector : Net Interest Income

2.52.6

2.8 2.9 3.0

6.6%6.2% 2.7%

4.2%

2014 2015 2016 2017 2018

BAHRAIN

Net Interest Income (USD Bn)

5.05.4 5.6

6.26.9

8.3%3.6%

10.6%

10.6%

2014 2015 2016 2017 2018

KUWAIT


1.41.6 1.7 1.7

1.8

10.6%5.7% 0.8%

8.7%

2014 2015 2016 2017 2018

OMAN


6.4 6.7

8.18.6 9.0

5.5%

21.3%5.9%

4.4%

2014 2015 2016 2017 2018

QATAR


13.5 14.315.6

17.018.4

6.2%

9.0%

9.2%

8.3%

2014 2015 2016 2017 2018

Saudi Arabia


12.413.5 13.2

15.116.3

8.9%

-2.7%

14.5%

8.3%

2014 2015 2016 2017 2018

UAE


41.1 44.1 46.951.4

55.4

7.3%6.3%

9.6%7.7%

2014 2015 2016 2017 2018

GCC Banking Sector | Net Interest Income (USD Bn)


7

KAMCO Research

April - 2019


GCC Banking Sector : Net Interest Margin

2.4%2.5%

2.7%2.7%

2.7%

2014 2015 2016 2017 2018

Bahrain

Net Interest Margin (%)

2.7%2.7%

2.8%

2.9%

3.0%

2014 2015 2016 2017 2018

Kuwait


3.2%

3.1%

3.0%

2.9%2.9%

2014 2015 2016 2017 2018

Oman


2.8%

2.7%

2.8%

2.5%2.5%

2014 2015 2016 2017 2018

Qatar


2.9%2.8%

3.0%

3.2%

3.4%

2014 2015 2016 2017 2018

Saudi Arabia


3.6%3.5%

3.3%3.4%

3.2%

2014 2015 2016 2017 2018

UAE


3.00%

2.95%

2.97%

3.03%

3.05%

2014 2015 2016 2017 2018

GCC Banking Sector | Net Interest Margin (%)


8

KAMCO Research

April - 2019


GCC Banking Sector : Total Revenue

4.0

4.1

4.44.3

4.6

2.5%

7.8%

-2.0%

5.8%

2014 2015 2016 2017 2018

BAHRAIN

Total Bank Revenue (USD Bn)

8.0 8.2 8.0

8.8

9.41.6%

-1.5%

10.1%

6.7%

2014 2015 2016 2017 2018

KUWAIT


2.1

2.32.4

2.5

2.6

10.7%3.2%

3.6%

7.0%

2014 2015 2016 2017 2018

OMAN


8.99.2

11.211.5

12.2

3.7%

21.2%3.3%

6.1%

2014 2015 2016 2017 2018

QATAR


21.122.4

23.424.5

25.8

6.3%

4.4%

4.7%

5.4%

2014 2015 2016 2017 2018

Saudi Arabia


18.8

20.7 20.3

23.1

24.6

10.0%

-1.8%

13.4%

6.5%

2014 2015 2016 2017 2018

UAE


62.966.9

69.7

74.779.2

6.3%

4.2%

7.2%

6.1%

2014 2015 2016 2017 2018

GCC Banking Sector


Source : Reuters, Company Financials, KAMCO Research. Note : Total Bank Revenue includes NII + Non-Interest Income

9

KAMCO Research

April - 2019


GCC Banking Sector : Gross Loans & Advances

65.266.0 66.2

70.0

68.6

1.2% 0.2%

5.7%

-1.9%

2014 2015 2016 2017 2018

BAHRAIN

Gross Loans & Advances (USD Bn)

142.3147.6 149.7

162.2

168.7

3.7%1.4%

8.4%

4.0%

2014 2015 2016 2017 2018

KUWAIT


41.6

45.8

50.6

54.257.3

10.1%

10.6%

7.0%

5.8%

2014 2015 2016 2017 2018

OMAN


189.8

219.0

263.6

288.3 288.515.4%

20.4%

9.3% 0.1%

2014 2015 2016 2017 2018

QATAR


346.7

372.9384.3

375.5388.6

7.5%

3.1%

-2.3%

3.5%

2014 2015 2016 2017 2018

Saudi Arabia

Gross Loans & Adv. (USD Bn)

299.7

326.9 333.0

397.2414.99.1%

1.9%

19.3%

4.5%

2014 2015 2016 2017 2018

UAE


1,085.31,178.2

1,247.4

1,347.21,386.6

8.6%

5.9%

8.0%2.9%

2014 2015 2016 2017 2018

GCC Banking Sector



10

KAMCO Research

April - 2019


GCC Banking Sector : Net Loans & Advances

63.463.9

64.2

67.4

65.8

0.9%0.5%

5.0%

-2.4%

2014 2015 2016 2017 2018

BAHRAIN

Net Loans & Advances (USD Bn)

132.1136.8 138.1

150.7

157.5

3.5% 1.0%

9.1%

4.6%

2014 2015 2016 2017 2018

KUWAIT


40.2

44.5

49.452.2

55.1

10.7%

11.0%

5.6%

5.7%

2014 2015 2016 2017 2018

OMAN


182.9

210.8

255.1

278.5 284.615.2%

21.0%

9.2%2.2%

2014 2015 2016 2017 2018

QATAR


340.0

366.1376.3

367.5377.7

7.7%

2.8%

-2.3%

2.8%

2014 2015 2016 2017 2018

Saudi Arabia


274.3

299.7 304.0

365.9378.8

9.3%1.4%

20.3%

3.5%

2014 2015 2016 2017 2018

UAE


1,032.9

1,121.8

1,187.2

1,282.31,319.5

8.6%

5.8%

8.0%

2.9%

2014 2015 2016 2017 2018

GCC Banking Sector



11

KAMCO Research

April - 2019


GCC Banking Sector : Customer Deposits

89.490.3

88.6

94.295.0

1.0%

-1.8%

6.2%

0.9%

2014 2015 2016 2017 2018

BAHRAIN

Customer Deposits (USD Bn)

196.3 195.2 195.8

208.6

216.8

-0.6%

0.3%

6.5%

3.9%

2014 2015 2016 2017 2018

KUWAIT


45.6

54.5

52.053.9

57.7

19.4%

-4.5%

3.6%

7.1%

2014 2015 2016 2017 2018

OMAN


201.8

225.7

266.4

297.4 303.611.9%

18.0%

11.6%2.1%

2014 2015 2016 2017 2018

QATAR


449.7

461.2463.2

450.5

461.6

2.5%

0.5%

-2.7%

2.5%

2014 2015 2016 2017 2018

Saudi Arabia


333.9362.9

347.8

447.7479.2

8.7%

-4.2%

28.7%

7.0%

2014 2015 2016 2017 2018

UAE


1,316.7

1,389.7 1,413.8

1,552.3

1,613.85.5%1.7%

9.8%

4.0%

2014 2015 2016 2017 2018

GCC Banking Sector



12

KAMCO Research

April - 2019


GCC Banking Sector : Loan-to-Deposit Ratio

70.9% 70.8%

72.5%

71.6%

69.3%

2014 2015 2016 2017 2018

Bahrain

Loan-to-Deposit Ratio (%)

67.3%

70.1%70.5%

72.2%72.7%

2014 2015 2016 2017 2018

Kuwait


88.2%

81.7%

95.0%96.8%

95.6%

2014 2015 2016 2017 2018

Oman


90.6%

93.4%

95.8%

93.7% 93.7%

2014 2015 2016 2017 2018

Qatar


75.6%

79.4%

81.2%81.6% 81.8%

2014 2015 2016 2017 2018

Saudi Arabia


82.1%82.6%

87.4%

81.7%

79.0%

2014 2015 2016 2017 2018

UAE


78.4%

80.7%

84.0%

82.6%

81.8%

2014 2015 2016 2017 2018

GCC Banking Sector | Loan-to-Deposit Ratio (%)


13

KAMCO Research

April - 2019


GCC Banking Sector : Yield on Credit

3.9%

4.0%

4.2% 4.2%

4.3%

2014 2015 2016 2017 2018

BAHRAIN

Yield on Credit (%)

3.6%

3.7%3.8%

4.0%

4.2%

2014 2015 2016 2017 2018

KUWAIT

Yield on Credit (%)

3.7%

3.6%

3.4%

3.2%

3.3%

2014 2015 2016 2017 2018

OMAN

Yield on Credit (%)

3.6%

3.3%

3.4%

3.1% 3.1%

2014 2015 2016 2017 2018

QATAR

Yield on Credit (%)

4.5%

4.0%

4.1%

4.5%

4.8%

2014 2015 2016 2017 2018

SAUDI ARABIA

Yield on Credit (%)

4.4%4.3%

4.0%

4.1%

4.0%

2014 2015 2016 2017 2018

UAE

Yield on Credit (%)

4.1%

3.9%3.9%

4.0%

4.1%

2014 2015 2016 2017 2018

GCC Banking Sector | Yield on Credit (%)


14

KAMCO Research

April - 2019


GCC Banking Sector : Cost of Funds

2.7%

2.8%2.9%

3.0%

3.3%

2014 2015 2016 2017 2018

BAHRAIN

Cost of Funds (%)

1.2% 1.2%

1.6%

1.7%

2.1%

2014 2015 2016 2017 2018

KUWAIT

Cost of Funds (%)

1.4%

1.2%

1.5%

2.1%

2.4%

2014 2015 2016 2017 2018

OMAN

Cost of Funds (%)

1.6% 1.6%

3.0%3.3%

4.0%

2014 2015 2016 2017 2018

QATAR

Cost of Funds (%)

0.5% 0.5%

1.0%

0.9%

1.0%

2014 2015 2016 2017 2018

SAUDI ARABIA

Cost of Funds (%)

1.0% 1.0%

1.5%

1.7%

2.0%

2014 2015 2016 2017 2018

UAE

Cost of Funds (%)

1.1% 1.1%

1.7%1.8%

2.2%

2014 2015 2016 2017 2018

GCC BANKING SECTOR | Cost of Funds (%)


15

KAMCO Research

April - 2019


GCC Banking Sector : Cost-to-Income Ratio

48.2%

47.5%

46.9%

48.5%

49.1%

2014 2015 2016 2017 2018

BAHRAIN

Cost-to-Income Ratio (%)47.0%

44.4% 44.7% 44.7%

41.8%

2014 2015 2016 2017 2018

KUWAIT

Cost-to-Income Ratio (%)

48.5%

49.2%

48.6%

50.5%

47.9%

2014 2015 2016 2017 2018

OMAN


30.0%

31.9%

36.4%

34.8%

32.1%

2014 2015 2016 2017 2018

QATAR


39.1%

40.4%

41.8%

40.0%39.7%

2014 2015 2016 2017 2018

SAUDI ARABIA


38.1%

39.9%

37.3%

38.4%

39.1%

2014 2015 2016 2017 2018

UAE


39.4%

40.3%

40.5%

40.1%

39.4%

2014 2015 2016 2017 2018

GCC BANKING SECTOR | Cost-to-Income Ratio (%)


16

KAMCO Research

April - 2019


GCC Banking Sector : Market Data

Name CountryM-CAP

(USD Bn)Price (LCL) P/E (x) P/BV (x)

Div Ind

Yield (%)

YTD-19

Returns

3-Yr Avg

Tot Return

5-Yr Avg

Tot Return

10-Yr Avg

Tot Return

AHLI UNITED BANK B.S.C Bahrain 7.3 0.830 10.7 2.0 5.5 40.8% 27.9% 14.2% 18.3%

NATIONAL BANK OF BAHRAIN BSC Bahrain 2.6 0.625 13.5 2.1 3.6 16.8% 16.3% 9.7% 11.5%

ARAB BANKING CORP Bahrain 1.4 0.440 6.9 0.4 6.8 13.3% N/A -2.3% 1.9%

BBK BSC Bahrain 1.3 0.436 8.4 1.1 9.2 3.9% 18.9% 8.1% 7.8%

AL-SALAM BANK Bahrain 0.5 0.085 9.4 0.6 4.0 -8.7% 1.5% -13.9% 4.0%

ALBARAKA BANKING GROUP Bahrain 0.4 0.330 4.2 0.4 9.1 20.6% -4.2% -11.0% -8.5%

BAHRAIN ISLAMIC BANK Bahrain 0.3 0.120 10.9 1.1 N/A -7.7% N/A -6.3% -8.1%

ITHMAAR HOLDING BSC Bahrain 0.2 0.070 N/A 1.8 N/A -17.6% -18.6% -15.7% -10.6%

KHALEEJI COMMERCIAL BANK Bahrain 0.2 0.061 87.9 0.6 N/A -27.4% 1.1% 0.2% -6.3%

NATIONAL BANK OF KUWAIT Kuwait 19.4 0.916 15.9 1.9 3.6 19.6% 22.1% 8.1% 10.0%

KUWAIT FINANCE HOUSE Kuwait 15.2 0.671 20.5 2.8 2.7 24.2% 25.6% 8.4% 5.8%

BOUBYAN BANK K.S.C Kuwait 5.6 0.560 28.4 4.1 1.3 12.9% 20.0% 8.4% 12.5%

COMMERCIAL BANK OF KUWAIT Kuwait 3.3 0.512 15.9 1.4 3.5 16.2% 19.3% 4.9% -1.0%

GULF BANK Kuwait 2.9 0.302 15.8 1.4 3.3 23.7% 11.4% -1.1% -0.6%

BURGAN BANK Kuwait 2.8 0.326 11.0 1.1 3.5 27.0% 5.5% -3.2% 7.2%

AHLI UNITED BANK (ALMUTAHED) Kuwait 1.9 0.308 11.9 1.3 4.6 13.7% -0.9% -5.9% 5.6%

AL AHLI BANK OF KUWAIT Kuwait 1.7 0.323 12.4 0.9 4.3 14.0% 2.5% -2.9% 0.9%

WARBA BANK KSCP Kuwait 1.2 0.242 38.3 1.9 N/A 15.2% 14.1% -2.4% N/A

KUWAIT INTERNATIONAL BANK Kuwait 0.9 0.283 13.2 1.0 3.7 15.4% 19.2% 3.0% 8.7%

BANKMUSCAT SAOG Oman 3.2 0.402 6.7 0.7 8.3 11.5% 12.0% 2.8% 9.2%

BANK DHOFAR SAOG Oman 1.0 0.126 10.7 0.7 7.4 -13.5% -9.1% -4.7% 4.8%

NATIONAL BANK OF OMAN SAOG Oman 0.7 0.165 6.1 0.6 9.7 -1.1% -4.7% 1.2% 5.7%

HSBC BANK OMAN Oman 0.6 0.120 7.4 0.7 7.8 8.4% 4.5% 0.5% -3.3%

SOHAR INTERNATIONAL BANK Oman 0.6 0.112 7.3 0.8 5.4 6.4% -5.3% -5.3% 5.5%

AHLI BANK Oman 0.5 0.120 8.3 0.7 7.9 -7.0% -4.2% 0.1% 8.4%

BANK NIZWA Oman 0.3 0.088 16.4 1.0 N/A -3.3% 5.0% -0.2% N/A

AL IZZ ISLAMIC BANK Oman 0.2 0.083 38.4 1.1 N/A -7.8% 12.0% -3.7% N/A

QATAR NATIONAL BANK Qatar 49.4 195.7 13.8 2.8 3.1 3.7% 18.2% 9.7% 21.5%

QATAR ISLAMIC BANK Qatar 11.0 170.0 15.4 2.7 2.9 15.6% 25.3% 19.8% 15.6%

MASRAF AL RAYAN Qatar 7.4 36.2 12.7 2.2 5.5 -8.5% 7.2% -0.7% 18.5%

COMMERCIAL BANK PQSC Qatar 5.5 50.0 14.0 1.3 3.0 31.3% 15.0% 1.0% 9.6%

QATAR INTERNATIONAL ISLAMIC Qatar 2.9 70.8 12.7 2.0 5.6 13.8% 10.8% 2.5% 13.2%

AL AHLI BANK Qatar 1.9 30.0 10.4 1.3 3.0 21.9% -2.9% -1.4% 8.2%

DOHA BANK QSC Qatar 1.8 21.8 11.1 0.8 4.6 3.2% -8.3% -12.2% 7.3%

AL KHALIJ COMMERCIAL BANK Qatar 1.2 11.9 7.7 0.8 6.3 9.9% -6.4% -6.8% 5.8%

AL RAJHI BANK Saudi Arabia 50.5 75.8 17.5 3.9 3.9 35.9% 30.2% 16.8% 12.6%

NATIONAL COMMERCIAL BANK Saudi Arabia 49.0 61.2 17.5 3.2 3.6 30.3% 32.2% N/A N/A

RIYAD BANK Saudi Arabia 23.6 29.5 16.9 2.4 2.7 51.4% 45.7% 16.9% 14.6%

SAMBA FINANCIAL GROUP Saudi Arabia 20.4 38.3 14.1 1.8 5.2 25.1% 25.7% 14.8% 11.6%

SAUDI BRITISH BANK Saudi Arabia 16.1 40.3 12.2 1.9 5.0 26.4% 26.1% 8.4% 6.9%

BANQUE SAUDI FRANSI Saudi Arabia 12.8 40.0 14.4 1.6 4.0 27.2% 20.0% 9.9% 6.7%

ALINMA BANK Saudi Arabia 11.0 27.5 15.4 1.9 3.6 24.6% 28.7% 12.2% 10.6%

ARAB NATIONAL BANK Saudi Arabia 10.8 27.1 11.9 1.5 4.2 30.1% 31.4% 12.5% 8.4%

ALAWWAL BANK Saudi Arabia 5.7 18.7 18.8 1.5 N/A 23.6% 12.9% 3.0% 7.1%

BANK ALBILAD Saudi Arabia 5.2 25.8 16.5 2.3 N/A 18.3% 18.4% 4.4% 9.4%

SAUDI INVESTMENT BANK/THE Saudi Arabia 4.0 20.1 10.0 1.3 N/A 17.2% 20.9% 2.6% 9.0%

BANK AL-JAZIRA Saudi Arabia 3.7 16.7 12.9 1.2 3.0 20.6% 21.9% -3.0% 7.6%

FIRST ABU DHABI BANK PJSC UAE 49.1 16.5 15.6 2.0 4.5 23.4% 29.6% 9.7% 19.9%

EMIRATES NBD PJSC UAE 18.0 11.9 6.7 1.2 3.4 39.5% 17.7% 8.1% 20.1%

EMIRATES ISLAMIC BANK UAE 14.8 10.0 48.0 7.1 N/A 0.1% 93.9% N/A N/A

ABU DHABI COMMERCIAL BANK UAE 14.3 10.1 11.2 1.8 4.6 29.5% 21.7% 11.0% 25.4%

DUBAI ISLAMIC BANK UAE 9.5 5.3 7.3 1.5 6.6 13.2% 11.5% 6.7% 17.6%

ABU DHABI ISLAMIC BANK UAE 4.8 4.8 8.1 1.4 5.7 31.7% 15.8% 1.0% 16.2%

UNION NATIONAL BANK/ABU DHAB UAE 4.4 5.9 17.9 1.0 3.4 31.1% 23.9% 1.6% 17.0%

MASHREQBANK UAE 3.7 76.0 6.5 0.7 5.3 2.3% 2.7% -2.9% -0.7%

COMMERCIAL BANK OF DUBAI UAE 3.0 4.0 9.2 1.2 5.2 4.7% -7.0% 0.0% 12.2%

NATIONAL BANK OF FUJAIRAH UAE 2.4 4.8 15.2 1.9 1.5 13.8% 11.4% 12.6% N/A

INVEST BANK UAE 2.2 2.5 N/A 1.6 N/A 0.0% 6.0% 0.3% 16.6%

NATIONAL BANK OF RAS AL-KHAI UAE 2.0 4.4 7.6 1.1 6.9 11.1% 0.0% -5.6% 15.8%

NATIONAL BANK OF UMM AL QAIW UAE 1.2 2.3 10.6 1.0 4.7 -18.0% -7.7% -1.3% 1.5%

SHARJAH ISLAMIC BANK UAE 0.9 1.2 6.4 0.6 7.0 7.1% -0.2% -3.9% 10.1%

UNITED ARAB BANK PJSC UAE 0.7 1.2 31.8 1.0 N/A -0.8% -19.0% -24.6% N/A

BANK OF SHARJAH UAE 0.5 0.9 5.5 0.5 N/A -9.2% -9.6% -12.6% 1.9%

AJMAN BANK PJSC UAE 0.5 0.9 9.3 0.8 3.9 3.9% -17.9% -18.0% 1.8%

COMMERCIAL BANK INTERNATIONA UAE 0.3 0.6 4.8 0.5 N/A -29.8% -32.8% -22.5% -5.8%

AMLAK FINANCE UAE 0.1 0.3 N/A 0.4 N/A -4.9% -39.3% N/A N/A

Source : Bloomberg

KAMCO is authorized and fully regulated by the Capital Markets Authority ("CMA, Kuwait") and partially regulated by the Central Bank of Kuwait (“CBK”)

This document is provided for informational purposes only. Nothing contained in this document constitutes investment, an offer to invest , legal, tax or other advice or guidance and should be disregarded when considering or making investment decisions. In preparing this document, KAMCO did not take into account the investment objectives, financial situation and particular needs of any particular person. Accordingly, before acting on this document, investors should independently evaluate the investments and strategies referred to herein and make their own determination of whether it is appropriate in light of their own financial circumstances and objectives. The entire content of this document is subject to copyright with all rights reserved. This research and the information contained herein may not be reproduced, distributed or transmitted in Kuwait or in any other jurisdiction to any other person or incorporated in any way into another document or other material without our prior written consent.

Analyst Certification

Each of the analysts identified in this report certifies, with respect to the sector, companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report.

KAMCO Ratings

KAMCO investment research is based on the analysis of regional and country economics, industries and company fundamentals. KAMCO company research reflects a long-term (12-month) target price for a company or stock. The ratings bands are:

Outperform: Target Price represents expected returns >= 10% in the next 12 months

Neutral: Target Price represents expected returns between -10% and +10% in the next 12 months

Underperform: Target Price represents an expected return of <-10% in the next 12 months

In certain circumstances, ratings may differ from those implied by a fair value target using the criteria above. KAMCO policy is to maintain up-to-date fair value targets on the companies under its coverage, reflecting any material changes to the analyst’s outlook on a company. Share price volatility may cause a stock to move outside the rating range implied by KAMCO’s fair value target. Analysts may not necessarily change their ratings if this happens, but are expected to disclose the rationale behind their view to KAMCO clients.

Any terms and conditions proposed by you which are in addition to or which conflict with this Disclaimer are expressly rejected by KAMCO and shall be of no force or effect. The information contained in this document is based on current trade, statistical and other public information we consider reliable. We do not represent or warrant that such information is fair, accurate or complete and it should not be relied upon as such. KAMCO has no obligation to update, modify or amend this document or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. The publication is provided for informational uses only and is not intended for trading purposes. The information on publications does not give rise to any legally binding obligation and/or agreement, including without limitation any obligation to update such information. You shall be responsible for conducting your own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this or other such document. Moreover, the provision of certain data/information in the publication may be subject to the terms and conditions of other agreements to which KAMCO is a party.

Nothing in this document should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction, or to provide any investment advice or service. This document is directed at Professional Clients and not Retail Clients within the meaning of CMA rules. Any other persons in receipt of this document must not rely upon or otherwise act upon it. Entities and individuals into whose possession this document comes are required to inform themselves about, and observe such restrictions and should not rely upon or otherwise act upon this document where it is unlawful to make to such person such an offer or invitation or recommendation without compliance with any authorization, registration or other legal requirements.

KAMCO Investment Company (DIFC) Limited (“KAMCO DIFC”) is regulated by the Dubai Financial Services Authority (DFSA). KAMCO DIFC may only undertake the financial services activities that fall within the scope of its existing DFSA licence. This document is intended for Professional Clients or Market Counterparties only as defined by the DFSA, and no other person should act upon it.’

Risk Warnings

Any prices, valuations or forecasts are indicative and are not intended to predict actual results, which may differ substantially from those reflected. The value of an investment may go up as well as down. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including, without limitation, foreseeable or unforeseeable changes in interest rates, foreign exchange rates, default rates, prepayment rates, political or financial conditions, etc.).

Past performance is not indicative of future results. Any opinions, estimates, valuations or projections (target prices and ratings in particular) are inherently imprecise and a matter of judgment. They are statements of opinion and not of fact, based on current expectations, estimates and projections, and rely on beliefs and assumptions. Actual outcomes and returns may differ materially from what is expressed or forecasted. There are no guarantees of future performance. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. This document does not propose to identify or to suggest all of the risks (direct or indirect) which may be associated with the investments and strategies referred to herein.

Conflict of Interest

KAMCO and its affiliates provide full investment banking services, and they and their directors, officers and employees, may take positions which conflict with the views expressed in this document. Salespeople, traders, and other professionals of KAMCO may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this document. Our asset management area, our proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this document. KAMCO may have or seek investment banking or other business relationships for which it will receive compensation from the companies that are the subject of this document. Facts and views presented in this document have not been reviewed by, and may not reflect information known to, professionals in other KAMCO business areas, including investment banking personnel. United Gulf Bank, Bahrain owns majority of KAMCO’s shareholding and this ownership may create, or may create the appearance of, conflicts of interest.

No Liability & Warranty

KAMCO makes neither implied nor expressed representations or warranties and, to the fullest extent permitted by applicable law, we hereby expressly disclaim any and all express, implied and statutory representations and warranties of any kind, including, without limitation, any warranty as to accuracy, timeliness, completeness, and fitness for a particular purpose and/or non-infringement. KAMCO will accept no liability in any event including (without limitation) your reliance on the information contained in this document, any negligence for any damages or loss of any kind, including (without limitation) direct, indirect, incidental, special or consequential damages, expenses or losses arising out of, or in connection with your use or inability to use this document, or in connection with any error, omission, defect, computer virus or system failure, or loss of any profit, goodwill or reputation, even if expressly advised of the possibility of such loss or damages, arising out of or in connection with your use of this document. We do not exclude our duties or liabilities under binding applicable law.

Disclaimer & Important Disclosures

KAMCO Investment Company



Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq

P.O. BOX : 28873, Safat 13149, State of Kuwait

Tel: (+965) 1852626 Fax: (+965) 22492395

Email : [email protected]

Website : http://www.kamconline.com

mailto:[email protected]

http://www.kamconline.com

Documents

KAMCO Research · KAMCO Research April -2019 G anking Sector Report Highlights - G anking Sector This report analyzes financials reported by 66 listed banks in the G for 2018. The