ALBAWABA – Despite higher-interest rates, following the United States Federal Reserve’s rate hikes, the Kamco Invest report on the Gulf Cooperation Council’s (GCC) banking sector showed that GCC banks issued more loans in the second quarter of 2023, Arab News reported Sunday.
In an effort to curb high inflation in the US, the Federal Reserve raised its key interest rate from 0.5 percent in March 2022 to the highest level in more than 20 years, at 5.5 percent, in July 2023.
Naturally, higher interest rates in the US result in higher interest rates elsewhere around the world, including the GCC, raising borrowing costs for individuals and businesses alike.
However, GCC banks issued more loans in the second quarter of the year 2023, registering a record-high of $1.9 trillion in gross loans by the end of the quarter.
Kamco’s report underscored a quarter-on-quarter growth of 1.9 percent, or $36.3 billion, backed by growth observed in lending across all GCC markets.
Similarly, aggregate net loans experienced a slightly more modest growth of 1.7 percent during the quarter, reaching a total of $1.8 trillion, according to the report.
Saudi Arabia’s banks saw a 2.5 percent growth in the second quarter of 2023, whereas banks in Kuwait, Qatar, Bahrain, and Oman witnessed growth rates below 1 percent, Arab News pointed out.
Saudi capital city of Riyadh - Shutterstock
The Kamco report attributed Saudi lending growth to growth in various sectors, including utilities, real estate, and trade. Combined, these sectors exhibited over 5 percent growth quarter-on-quarter in the second three months of 2023.
As for liquidity, the report observed that listed GCC banks reported a slight uptick of 1 percent quarter-on-quarter in customer deposits, reaching $2.3 trillion.
This shift was driven by higher deposits across most markets, offsetting declines in Qatar and Kuwait, according to Arab News.
Regionally, the report attributed this growth in GCC banks lending activities to a robust projects market pipeline and government efforts to mitigate the impact of higher interest rates.
As a result of the growth in GCC banks lending activities, the aggregate loan-to-deposit ratio reached 79 percent by the end of the second quarter this year, as reported by Arab News.
“Total net income reached $13.7 billion with a quarter-on-quarter increase of 3.5 percent supported by both higher net interest income and non-interest income during the quarter,” Kamco’s report stated, adding that higher interest rates supported net interest income during the quarter.
