KPMG report reveals New Age Banking trends

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KPMG recently released its fifth edition of the ‘GCC listed banks’ results’ report, which analyzes the published results of listed commercial banks across the region for the year ended 31 December 2019. The report, titled ‘New Age Banking’, has shown that Kuwait banking sector has experienced a healthy growth of 8.2 percent in total assets with a marginal decline in net profits by 0.9 percent, mainly on account of higher expected credit losses in 2019. Non-oil growth was a moderate 2.5 percent in 2019, which resulted in stable consumer spending and supported the growth in banking assets. The Kuwait banking sector is well capitalized with the average capital adequacy ratio at 18 percent in 2019. The non-performing loans ratio for the sector remained low at 1.3 percent as of December 2019.

The local banking sector continues to prove strength and resilience as Kuwait banks saw growth in their asset base by 8.2 percent despite the liquidity pressure. Market sentiment has also reflected these fundamentals with the share prices of all listed banks, except one, showing an upward trend, although this trend has reversed in 2020 with an average decline of 24% in listed bank share prices in Kuwait from 1 January 2020 to 30 April 2020. 

Speaking about the report, Bhavesh Gandhi, Partner and Head of Financial Services for KPMG in Kuwait, commented, “The financial trends identified through our analysis were largely positive, which, given the unique political and economic circumstances the region has witnessed in recent years, is particularly impressive, reflecting the continued resilience of the banking sector.”

On another note, the COVID-19 pandemic that the world is facing since the beginning of the year 2020 is having unprecedented impact on the financial markets globally and locally and creating a unique situation for the industry because of the implications for operating models, employees, suppliers, customers, and the drop in oil prices that all affected financial results. Banking experts agree that the sector will be dealing with the effects of this pandemic for the foreseeable future, leading the banking sector to evolve, and only agile and flexible banks that are willing to transform will succeed and secure their financial strength for future growth. 

Looking to the future of the financial services sector in light of the current pandemic we are experiencing, Gandhi commented: “We are witnessing banks evolving at a faster pace than ever before and in some cases transforming their business models and venturing into “new age banking”, be it through the use of Artificial Intelligence (AI) or Robotic Process Automation (RPA). We expect banks to continue to aggressively pursue technological advancement and use revamped business platforms, by partnering and collaborating with various Fintech firms.”

Lenders in the GCC have been rapidly consolidating as they strive to remain competitive. In 2019, most GCC countries experienced mergers, or talks to merge, both in the conventional and Islamic banking sector thus creating larger, stronger and more resilient financial institutions. One of the mergers announced during 2019, was a cross border merger between a bank from Kuwait and Bahrain. It’s expected that this consolidation drive will continue in 2020 across the region, with numerous talks or potential further transactions.

Additional insights in the report find that although regional banks have remained resilient in terms of profitability and asset growth, they do however continue to focus on managing the credit quality of their loan portfolios to ensure this resilience can be maintained.

The report titled ‘GCC listed banks’ results’ New Age Banking ‘analyses the results of selected listed banks in the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the Kingdom of Saudi Arabia, the State of Qatar and the United Arab Emirates. It summarizes bank’s results against selected key performance indicators for the year ended 31 December 2019 and compares these with the same information for the year ended 31 December 2018.

This news has been read 14104 times!