Banking in the Middle East: while banks in the Middle East have produced outstanding profit growth in recent years, overbanking and regulatory issues will need to be addressed to enable sustained high-level returns.(INTERNATIONAL BANKING)

Publication: Journal of Banking and Financial Services

Publication Date: 01-AUG-05

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COPYRIGHT 2005 Australian Institute of Banking and Finance

Strong economic activity

The Middle Eastern bloc economies have experienced rapid GDP growth in the past two years spurred by higher oil prices. This, in turn, has injected significant liquidity into financial markets.

This increased liquidity has led to many new construction projects, higher foreign direct investment and dramatic increases in stockmarkets. The stock indices in the UAE, Saudi Arabia and Qatar rose by over 60 per cent in 2003 and 2004. In this economic climate, banks in the Middle East have performed extraordinarily well.

Outstanding bank performance

In 2004, the net profits of the 45 listed banks in the Gulf Co-operation Countries (GCC) grew by 38.6 per cent and their assets increased by 14.8 per cent. Dubai Islamic Bank profits, for example, rose by 96 per cent, while the Arab Bank for Investment & Foreign Trade achieved a 64 per...

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