Bahrain banking sector remains resilient: KPMG

Manama : Bahrain’s banking sector has performed well amid challenges posed by economic conditions in the region, according a key report. It also states that the overall outlook for the GCC’s banking sector is positive. 

The report, an analysis published by KPMG, says: “In Bahrain, the annual growth in the financial services sector has been strong, from 1.7 per cent in 2015 to 7.4pc as of the third quarter in 2016.”

The report titled “GCC Listed Bank Results: Navigating Change”, however, adds that due to sharp declines in lending to certain sectors, “credit growth in Bahrain experienced renewed slowdown with peaks recorded around the beginning of 2016.”

This, according to KPMG, has made the sector move ahead by seeking innovative ways. 

The report also indicates that banks have performed well over the last 12 months considering margin compressions, increased impairment charges and increased funding costs. Whilst overall, net profit has declined year-on-year for the first time in recent years, asset growth has remained robust at 6.5pc on average across the region. 

Commenting on the results, Jalil Al Aali, Partner and Head of Financial Services at KPMG in Bahrain said, “The challenging economic conditions in the region have led to widespread drop in profits in the past 12 months. 

“Technology advancement, high internet and smartphones penetration rates all mean that digital banking is the future,” Al Aali added. 

Changing global regulatory requirements have clearly had an impact on the sector in the GCC with a number of positive changes being made to bring banks in line with new requirements. Capital adequacy ratios now stand at over 18pc across the region – above the minimum limits set in Basel III, reflecting effective capital raising activity.