Ernst & Young (EY)’s First Half 2023 Report on Banking in the Middle East and North Africa (MENA) has hoped that GCC banks will maintain flexibility throughout the rest of 2023.
Read more: Rise of Open Banking in MENA: A customer-centric financial ecosystem
The report further stated that economic conditions are anticipated to see continued improvement, with oil prices expected to remain strong, providing support to the region’s governments. Additionally, the report predicts a decline in inflation rates attributed to higher interest rates.
According to EY, the region witnessed substantial year-on-year growth, with net profits increasing by 30 percent and net assets experiencing a notable rise of 12.2 percent.
The paper further highlighted a year-on-year growth of 6.18 percent in equity yield, along with a 0.2 percent increase in net interest margin.
Non-performing loans
Non-performing loans are expected to remain at the current levels in 2023, with banks adopting a selective approach to lending, EY said.
This year, regulatory oversight will take center stage, emphasizing the ongoing implementation of the Article 4 of the Basel Convention. There will be an increased focus on combating financial crime, deploying electronic “know your customer” (KYC) processes, and strengthening measures against money laundering and cybersecurity threats.
“With limited effect to the ongoing banking industry crisis in the U.S. and Europe, the GCC banking sector has undergone a fundamental transformation and is now pursuing a strong upward trajectory, boosted by an increasing demand for lending,” Charlie Alexander, EY MENA financial services leader, said.
“This development is playing an increasingly important role in the region’s overall economic growth amid ongoing economic diversification drives,” Alexander said.
“Another positive trend fuelling the growth of the banking sector in the region is the pursuit of net-zero road maps by most GCC countries. It has led to a rise in the demand for sustainable finance, a key enabler of the transition to clean energy.”
Economic boost
Furthermore, the region’s outlook has received a boost from robust oil and gas prices, along with a substantial rise in non-oil economic activity, which has driven increased credit demand. Additionally, noteworthy trends in the banking sector include a strong financial position, government investments, anticipated improvements in the global economic landscape, and advancements in technology.
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