- MENA banks predict minimal net income changes in Q1 2024 with 72% anticipating higher YoY earnings.
- Saudi banks lead with +4.2% YoY earnings growth. Alinma Bank is poised for the highest YoY earnings and sequential loan growth in Saudi Arabia.
- UAE banks are facing earnings pressure due to corporate taxes, whereas most MENA banks anticipate stable to improved earnings.
- Egyptian banks forecast robust earnings growth (+36.8% YoY) driven by strong NIMs; slowdown in local currency lending anticipated.
A preview of quarterly financial earnings by CI Capital Research indicates that MENA banks under their coverage are poised to experience minimal changes in their aggregate net income on a year-on-year (YoY) basis in Q1 2024. Around 72% of them are expected to achieve higher YoY earnings growth.
Saudi Arabian banks are anticipated to outshine their GCC counterparts in terms of earnings and loan growth during Q1 2024. Conversely, UAE banks are predicted to face earnings pressure due to corporate taxes.
The analysts at CI Capital Research, including Sara Boutros and others, project that Saudi banks will exhibit the highest year-on-year (YoY) earnings growth at +4.2%, along with the most significant quarter-on-quarter (QoQ) system loan growth.
Alinma Bank in Saudi Arabia is highlighted in the report as poised to deliver the highest YoY earnings and sequential loan growth in the country.
On the other hand, UAE banks are forecasted to report lower earnings on both YoY and QoQ bases, attributed to the introduction of corporate taxes in Q1. This tax burden is expected to exert pressure on the financial performance of UAE banks during the specified period.
The report suggests that while most MENA banks are likely to witness stable to improved YoY earnings growth in Q1 2024, the performance divergence between Saudi Arabian and UAE banks will be notable.
Saudi banks are anticipated to excel in earnings and loan growth, driven by favorable market conditions, while UAE banks are expected to face challenges stemming from the imposition of corporate taxes.
The report indicates that for most GCC banks, there is an expectation of stable to lower net interest margins (NIMs). However, it points out that certain banks, such as Al Rajhi, Alinma, BSF, Al Bilad, ADIB, DIB, and NBK, are likely to be exceptions to this trend. This is due to favorable asset repricing conditions.
Turkish exposures are highlighted as a concern, particularly for Emirates NBD and Kuwait Finance House. This is attributed to the rapid rate hikes observed since the second half of 2023, which initially impact funding costs before leading to positive effects on asset yields.
In contrast, Egyptian banks are anticipated to experience robust earnings and balance sheet growth. The report forecasts a significant year-on-year increase of 36.8% and a quarter-on-quarter rise of 30.2% in Q1 2024 earnings.
This growth is expected to be driven by strong NIMs resulting from rising interest rates. It is projected to offset the anticipated decline in fee income and the increase in provisions.
Furthermore, the report mentions a one-off adjustment to banks’ foreign currency (FCY) books, which is expected to support loan and deposit growth. Nonetheless, there is an anticipation of a slowdown in lending denominated in local currency (LCY). This slowdown is attributed to the impact of higher policy rates on credit activity.
While most GCC banks are expected to witness stable to lower NIMs, exceptions exist due to favourable asset repricing. Turkish exposures pose challenges for certain banks, while Egyptian banks are anticipated to experience robust earnings growth despite some slowdown in local currency lending.
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Last Updated on April 10, 2024 by Safiya K
