Capital Market Reforms and Infrastructure Development are Key Enablers for GCC Banking Industry

The ICAI Abu Dhabi Chapter hosted the 26th Annual International Seminar on 13th and 14th Nov 2014 at Al Jaheli Theatre Auditorium, Abudhabi. Dr. R. Seetharaman, CEO of Doha Bank gave a key note address on "Uncertain times: Can GCC Banking take off? "on 13th Nov 2014.

Speaking at the conference Dr. R. Seetharaman gave insight on Global and GCC economies. He said "According to IMF Oct 2014 outlook, the IMF forecasts global growth to average 3.3 percent in 2014 and to rise to 3.8 percent in 2015.The weaker growth outlook for 2014 reflects setbacks to economic activity in the advanced economies during the first half of 2014, and a less optimistic outlook for several emerging market economies. The growth for Middle East, North Africa, Afghanistan and Pakistan is expected to be 2.7 percent in 2014 and 3.9 percent in 2015.GCC GDP at current prices is expected to grow by 3.7 percent in 2014. The current account balance as a percentage of GDP at current prices is expected to be 18 percent in 2014."


Dr. R.Seetharaman highlighted the current trends in GCC Banking Sector. He said "Banks in the UAE have been prime beneficiaries of a revival in which the economy grew by more than 4 percent as interest rates reached new lows and credit growth rebounded. Key sectors, such as tourism and corporate services, are performing strongly and a strong rebound in real estate prices has improved the loan demand. Loan growth in the United Arab Emirates is set to jump at least by 8 percent in 2014.In Saudi Arabia Private sector lending had grown by more than 11 percent till Sept 2014. Public Sector lending had gone up by close to 9 percent till Sept 2014.In Sept 2014 Saudi Arabia's bank watchdog had introduced new regulations that cap retail lending and curb the fees that lenders can charge. In Oman credit off take was close to 9 percent till Sept 2014. In Kuwait Bank lending to the private sector grew close to 4 percent till Sept 2014. In Qatar lending growth was more than 10 percent till Sept 2014. The Retail, Contract and services sector are the key sectors which contribute to growth in Qatar in 2014. GCC has projects worth more than $529bn in 2014 which contribute to surge in contract financing and project financing. SME sector is also an area which is given thrust by GCC Banks. UAE property sector has seen revival after winning bid for expo 2020."

Dr. R.Seetharaman gave insight on GCC Capital markets. He said "Qatar and UAE markets had surged this year after MSCI upgrade. All GCC markets witnessed correction recently on account of fall in oil prices but have stabilsed again. Positive results during earnings season gave cushion to markets. MSCI upgrade of Qatar and UAE would entice family-owned companies to go public. MSCI upgrade is an opportunity for Qatar & UAE companies to refocus on corporate Governance, encourage foreign ownership and thereby improve their market capitalisation. Qatar Exchange is also planning to introduce margin trading and covered short selling in the near future. In 1st half of 2014 GCC region witnessed 10 IPOs which was worth $2.26 billion. The 3rd quarter of 2014 witnessed a major IPO from Emaar Malls Group. In July 2014 Saudi Arabia Cabinet's approved to open the stock market for direct foreign investments. The actual opening of the market is seen during the first half of 2015. In 2014 GCC bond issues are worth more than $38 bn. In July 2014 UAE published new rules allowing firms in the country to use existing shares when listing on local exchanges or raise fresh equity capital. Private equity groups are expected to be among the main beneficiaries of the new law."

Dr. R.Seetharaman highlighted on wealth funds in GCC. He said "GCC economies are dominated by Sovereign Wealth Funds (SWF) that account for approximately more than 30% of the global SWF assets, valued at $6trn.Gulf SWFs have invested in a wide range of industries and high-risk assets with higher expected return. Qatar has made investments in UK, France and Germany. The assets under management growth in the GCC will be mainly driven by positive economic outlook, family businesses & entrepreneurship and the population demographics."

The GCC Banking sector has got regulated in line with the global financial architecture after the crisis however infrastructural development and capital market reforms are going to provide opportunities and are the key enablers of GCC Banking industry.

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