Markaz: Overall GCC earnings decline by one per cent in H1 2017
span style="font-size: small;">During H1-2017 GCC corporates posted a negative one per cent growth compared to the same period last year, according to Kuwait Financial Centre “Markaz”.
Saudi Arabia, Bahrain and Kuwait were three countries to put up positive earnings performance growing by seven per cent, six per cent and two per cent respectively. Saudi Arabia’s earnings growth was largely helped by the positive momentum in its non-oil private sector while Kuwait was largely helped by the positive performance in the commodities sector and its real estate sector.
Lower oil prices continued to persist, despite the humongous efforts taken by the OPEC cartel to reduce the supply glut. Brent crude declined by 9.3 per cent in Q2 2017 closing at $47.92 compared to $52.83 at the end of Q1 2017. Overall, IPE Brent crude has tumbled 15.7 per cent from the start of 2017 making it the worst performing first half for oil since 1998.
Lower oil prices results in lower deposits being made into the banks, and as result lowers credit being pumped into the economy. As a result of this, banking sector earnings have declined by one per cent during H1 2017 compared to the same period last year. Going forward, it is expected that GCC corporate earnings to expand by 8.1 per cent for the full year in 2017 based on stabilising oil prices and resilience in margins.
span style="font-size: small;">Saudi Arabia
Saudi Arabia witnessed a seven per cent increase in its overall earnings during H1 2017 largely prompted by the earnings increase in its commodities and telecommunications sector. Saudi Arabia’s commodities and telecom sector witnessed 13 per cent and 12 per cent increase in its earnings respectively. Surprisingly, the banking sector witnessed a two per cent decline in earnings. Al Rajhi Bank and Alinma Bank were the only banks in the country to witness positive earnings growth at 8 per cent and 14 per cent respectively. Construction related sector was the most affected and has been plagued by delayed cash cycle leading to significant losses as a result the earnings fell by 61 per cent.
span style="font-size: small;">Kuwait
Kuwait’s banking sector suffered a 2 per cent decline in its earnings during H1 2017 owing to difficult credit situations and subdued growth in its local market. National bank of Kuwait, Boubyan Bank and Burgan Bank posted double positive earnings growth of nine per cent, 15 per cent and 23 per cent respectively. Among the telecom players, Zain posted a negative growth of eight per cent owing to one-off extraordinary currency devaluation in Sudan. Ooredoo Kuwait witnessed a 21 per cent increase in earnings driven by customer addition and cost-cutting efforts. Kuwait’s commodities sector performed well driven by increasing commodity prices and posted a 20 per cent increase in its earnings.
span style="font-size: small;">United Arab Emirates
UAE’s overall earnings declined by two per cent during the first half of 2017. UAE’s banks managed to increased their earnings by one per cent during H1 2017 while the other two major sectors of the economy–telecom and real estate posted seven per cent and 37 per cent decline in earnings.