Bahrain: Listed banks’ total net profit rises 10% in 2022

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Bahrain - Listed banks in Bahrain saw their total net profit increase by 10 per cent and total assets grow by 1.6pc in 2022, as per a new report by KPMG.

This was driven by an increase in the return on assets and an overall increase in the net interest margin. The average return on equity for Bahrain banks was 10.8pc in 2022, highlights the audit and advisory firm’s analysis of GCC listed banks’ results, titled ‘Cautious optimism.’

The report studies the financial results and key performance indicators (KPIs) of leading listed commercial banks in the region, in comparison with the previous year, to highlight the main financial trends in the GCC countries.

Mahesh Balasubramanian, partner and head of financial services at KPMG in Bahrain, said that the banking sector in the GCC region had endured a challenging period in 2021, but is now witnessing a strong recovery.

He also noted that there is a shift in mindset amongst leaders within the sector, as they focus on building capital and strengthening their growth capital.

“Bahrain banks continued to build capital to strengthen their growth capital with an average capital adequacy ratio of 20.3pc, the highest amongst GCC countries,” Mr Balasubramanian added.

Overall, the GCC banking sector saw strong financial performance in 2022, with profitability increasing by 25.3pc, asset growth of 9.9pc, and a decrease in the NPL ratio to 3.8pc, the report says.

It attributes the solid performance to a number of factors, including: a growth in loan books, driven by lending to high-quality customers; increased interest margins, as a result of the rising interest rate environment; lower loan impairment charges, reflecting an improvement in credit quality and a continued focus on cost reductions and operating efficiency initiatives.

Share prices overall remained stable year-on-year, with a marginal increase of 0.7pc.

Profitability went up by 25.3pc, banks increased their asset base by 9.9pc, net interest margins rose by 0.2pc and the overall NPL ratio for the GCC banking sector decreased by 0.1pc to 3.8pc.

The report also highlighted a 1.2pc decrease in return on equity (ROE), compared to 2021, as equity growth outpaced profitability increases.

Dividend payout ratio in the region also witnessed a near-identical drop of about 1.3pc as banks looked to safeguard their earnings to further bolster equity positions and support future growth.

According to the report, banks continued extending adequate coverage for their performing loan book as stage 1 net provision charges grew six-fold compared to 2021. Furthermore, while well above the minimum regulatory requirements across all GCC countries, the average sector capital adequacy ratio dipped marginally (0.3pc) to 18.6pc.

Anticipating that the banking sector in the region will continue to build on its strong foundation, aided by a robust economic environment, KPMG expects that accelerated innovation plans, technology focus and continued government investment will witness further growth in the future, as banks in the region aim to look past the Covid-19 crisis.