gif Market review T 2009
A Great Year For Kuwati Banks as Provisions Total $2.6 billion Source:
GlobalIslamicFinanceMagazine.com
74 Global Islamic Finance October 2010
he financial turmoil has put
most of the markets and firms across the globe under a test of endurance and buoyancy. The unforeseen crisis hit sectors harder than ever expected and thereby resulted in a deterioration of a majority of global economies. The snow ball effect of the bubble revealed the vulnerabilities in the financial sec- tor, requiring countries to undertake exceptional stabilization measures to prevent its financial systems from crashing and minimize the losses brought about by the downturn.
Consequently, similar to all industries in the GCC region, the Banking Sector witnessed a slump in its performance as a consequence of the deterioration in the banks’ investment portfolios and real estate exposure along with impairments of investments. Moreover, in order to mitigate the risk of the crisis’ ef- fect on loans, banks have booked massive provisions as preemptive measures against the elevation in non-performing loans dur- ing Q3-08 and FY-09, which further weighed down on bottom line results.
Soundness of Banks in the GCC Region
Banks’ Performance & Profitability Although the GCC Banking sector is seen cur- rently to be far away from the soaring perfor- mance that has seen its total profit grow at a 4-year average of 22.2 per cent, the Sector’s profitability was hit hard by the financial cri- sis during Q4-08 and FY-09.
The Sector remained profitable, liquid and sound even though net profit recorded a contraction of 16.5 per cent and 7.9 per cent during FY-08 and FY-09 respectively, which was mainly due to high provisioning and impairment on investments. However, the foremost worries of the banking sector’s performance lies in the great stress in prop- erty market and the high volatility in equity investments which would force most banks for further provisioning and impairments.
Loan Portfolios Triggered by the liquidity squeeze along with prevailing tight conditions in the credit mar-
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