GCC banking sector to stabilize in 2018, says S&P Global

Most Gulf banks have been given a stable outlook this year. (Reuters)
Updated 10 January 2018

GCC banking sector to stabilize in 2018, says S&P Global

LONDON: Banks in the Gulf are expected to see their financial position stabilize this year as they reap the benefits of some regional economic improvement, according a report from the ratings agency S&P Global.
“2018 will mark the stabilization of the financial profiles and performance of GCC banks, after two years of significant pressure,” the report said.
Most of the banks in the region rated by the agency have a “stable” outlook, with the exception of Qatari institutions which have “negative” outlooks due to the continued uncertainty surrounding the boycott on the country imposed by a Saudi Arabia-led coalition of Arab states.
Lending growth in the Gulf banking sector is forecast to remain “muted” in 2018, according to S&P Global. Private-sector lending rose by an annualized 2.6 percent in the first nine months of 2017, which compares to 5.7 percent in 2016, the report said.
Strategic initiatives such as Dubai Expo 2020 and the Saudi Vision 2030 are expected to push up private-sector lending growth to around 3-4 percent between 2018 and 2019, the agency said.
Non-performing loan (NPL) ratios are forecast to continue to deteriorate in the first six months of the year before eventually stabilising, S&P said.
At the end of September 2017, NPL to total loans ratio for the region’s banks reached 3.1 percent compared to 2.9 percent recorded at the end of 2016.
Declining real estate prices in the UAE could reduce asset quality of Emirati banks, though the deterioration is likely to be “contained.”
Funding is improving in the region, with government deposits in the banking sector growing, particularly in the UAE and Saudi Arabia. In contrast, deposit growth is under pressure in Kuwait due to increased government spending.
The agency said Gulf banks’ funding profiles were “satisfactory,” with core customer deposits dominating funding, while the use of wholesale funding remains limited.
While there were some improvements in banks’ profits in the first nine months of 2017, S&P Global does not see this trend lasting.
It predicted that bank profitability will “plateau” this year, due in part to muted lending and reduced risk appetite.
The introduction of new regulations such as IFRS 9 will push up the cost of risk for banks, putting some off taking on more lucrative but higher risk exposures.


UAE-based companies turn to Bangladesh to build their ships

Updated 14 October 2019

UAE-based companies turn to Bangladesh to build their ships

  • Vessels worth $160 million were exported by the South Asian country last year

DHAKA: At present, Bangladeshi ships are being exported to around 12 countries in Asia, Africa and Europe.

“Made in Bangladesh ships have a huge potential in India, Pakistan, Saudi Arabia, the United Arab Emirates (UAE), Norway, Sweden, Denmark, Finland, Italy, Germany and some African countries. Now, our focus is to have more orders from different international buyers and Bangladesh government is also formulating the policies for this export oriented industries,” Dr. Abdullahel Bari, president of the Association of Export Oriented Shipbuilding Industries of Bangladesh (AEOSIB) told Arab News.

Bari, who is also the chairman of Ananda shipyard, said that the country has more than 100 shipyards which produce different kind of ships for the local and international markets. Of them, 12 large shipyards have the capacity to meet the demand of the international market. He said that Bangladesh will have a “golden period” in the next five years in the ship-building sector with both the government and private sector investors keen on exploring new opportunities.

“If everything goes according to the plan, our export earnings from shipbuilding will exceed the benchmark of $1 billion per year within the next five years,” Bari said.

He added that, as a Muslim nation, Bangladesh enjoys goodwill in the Middle East especially in Saudi Arabia and the UAE.

“To bag the opportunities in the Gulf countries, from now onwards, we should have more active participation in different marine fares in Saudi Arabia and UAE,” Dr. Bari said.

FASTFACTS

• At present, Bangladeshi ships are being exported to around 12 countries in Asia, Africa and Europe.

• Ananda Shipyard began exploring the European market by exporting a multi-purpose cargo vessel to the Germany.

• Bangladesh’s export earnings will exceed the benchmark of $1 billion per year within the next five years.

UAE-based shipping company Al Rashid shipping is already in talks with Bangladeshi shipbuilders to source its ships, with Western Marine Shipyard Limited (WMS) – one of the leading shipbuilders in the country – securing orders for the construction of two oil tankers worth $6.8 million. 

“With government support, shipbuilding could play an important role in export diversification. The main challenge for this sector is arranging working capital for projects. If banks and financial institutions come forward in supporting this sector, we can secure more orders from local and foreign buyers,” Saiful Islam, WMS Chairman, said. The shipbuilding company is expecting more orders from the UAE market after the successful delivery of these oil tankers.

“According to our capacity, Bangladeshi shipbuilders can only concentrate on building medium-sized vessels which is within 15,000 Dead Weight Tonnage (DWT) capacity and various utility vessels like OPV, TUGS, offshore vessels, survey vessels, inland container vessels, multi purpose cargo vessels, survey vessels, landing crafts, ro-ro ferries, passenger ships,” Captain Sohail Hasan, managing director of WMS told Arab News.

In 2017, Western Marine also exported one Landing Craft namely “Ajman Trans” to the same company making it the 43rd ship to be exported from Bangladesh.