Mubasher: Banks across the Gulf area slashed cash dividends for 2020 by 45.4% or $6.6 billion to $8 billion compared to $14.6 billion in 2019, as a result of the effect of the COVID-19 pandemic, according to a recent report by Kamco Invest.
The year 2020 was the second consecutive year of dividend cuts, following a decline of 21% or $3.9 billion in banks’ cash dividends in 2019 when compared to $18.5 billion in 2018.
Last year’s dividend cuts came after 17 banks in the GCC cancelled 2020 dividend payments.
Bahraini banks made the largest reduction in cash dividends at 72.4%. Saudi Arabian banks followed with cuts by 64.1% or $2.4 billion to $1.3 billion.
The Emirati banks slashed 2020 dividends by 36.4% to $3.3 billion, yet marking the highest absolute payments across the Gulf region during the year.
Meanwhile, Qatari banks recorded the smallest decline in dividends by 25.4% with payments totalling $2.1 billion in 2020.
Lending Growth in Q1
Borrowing from GCC banks continued to grow for the fourth quarter in a row during the first quarter (Q1) of 2021. Excluding Kuwaiti banks, gross loans in the Gulf stood at $1.43 trillion at the end of Q1-21, witnessing a 3.5% quarter-on-quarter (QoQ) increase.
The report showed that aggregate net loans, including Kuwaiti banks, grew at a much slower pace of 1.8% QoQ to $1.52 trillion.
The UAE was the only country across the GCC that reported a decline in net loans by 0.7%, while the rest of the region recorded a quarterly growth.
Customer deposits enlarged to $1.89 trillion at the end of Q1-21, with a growth of 2.3% compared to the fourth quarter of 2020.
GCC Banking Sector’s Assets
Total banking sector assets continued to increase for the fourth successive quarter in Q1-21, reaching a new record high of $2.51 trillion.
Omani banks achieved the biggest quarterly growth in total assets by 3.2%, yet it remained “the smallest banking industry in terms of listed bank total assets of $81 billion at the end of Q1-21,” Kamco Invest said.
UAE banks continued to account for the biggest share of GCC banking balance sheet with total assets of $818 billion. Saudi Arabia followed with assets standing at $673 billion.
Kamco Invest expected that “the unwinding of banking related COVID-19 relaxations” would present new challenges for the GCC banking sector during the second half (H2) of 2021, which has started this month.
Lower interest rates since the beginning of 2020, in addition to the expectations for rates to remain low in the near term, will likely affect banks’ toplines globally. The most recent data from the US Federal Reserve Board of Governors showed that rates would remain low with no sign of increasing rates until 2023.