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KPMG report reveals New Age Banking trends

KPMG report reveals New Age Banking trends

New Age Banking

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Mahesh Balasubramaniam, Partner, Financial Services at KPMG Bahrain

KPMG recently released its fifth edition of the ‘GCC listed banks’ results’ report, which analyzes the published results of listed commercial banks across the region for the year ended 31 December 2019. The report, titled ‘New Age Banking’, has shown that Bahrain’s banking sector saw positive results in 2019, with an average 1.8 percent year-on-year real growth in 2019 and 2.4 percent in nominal terms. This is mainly attributed to the marginal recovery of the oil sector due to planned maintenance in 1Q 2018, paired with the continued growth of the non-oil sector at a slower pace.

The local banking sector continues to prove strength and resilience as the listed banks in Bahrain saw growth in their asset base by 9 percent despite the liquidity pressure. These banks have also reported an average increase in its net profits by 1.5 percent as compared to prior year and have reported healthy capital ratios. During the year, Central Bank of Bahrain (CBB) continued to take various measures towards encouraging fintech companies and digital banking in the country. CBB is also cognizant of the risks arising from money laundering and cyber security and has continued to enhance the regulations around these areas, with an aim to make the financial sector more resilient.

Additional insights in the report find that although regional banks have remained resilient in terms of profitability and asset growth, they do however continue to focus on managing the credit quality of their loan portfolios to ensure this resilience can be maintained.

Speaking about the report, Mahesh Balasubramaniam, Partner, Financial Services at KPMG Bahrain, commented, “Conventional and Islamic banks in the region have been rapidly consolidating to create larger, stronger and more resilient financial institutions, as they seek to remain competitive in the current challenging times. One of the mergers announced during 2019, was a cross border merger between a bank from Kuwait and Bahrain. We expect that this consolidation drive will continue in 2020 across the region, with numerous talks or potential further transactions.”

COVID-19 pandemic that the world is facing since the beginning of the year 2020 is having unprecedent impact on the financial markets globally and locally and creating a unique situation for the industry because of the implications for operating models, employees, suppliers, customers, and the drop in oil prices that all affected financial results. Banking experts agree that the sector will be dealing with the effects of this pandemic for the foreseeable future, leading the banking sector to evolve, and only agile and flexible banks that are willing to transform will succeed and secure their financial strength for future growth.

Looking to the future of the financial services sector in light of the current pandemic we are experiencing, Mahesh commented: “In the light of the current COVID-19 crisis, stability has become a primary focus for banks today rather than growth. I believe banks are well positioned to weather the current economic and political challenges, given the expectation of continued government support and committed infrastructure investment, which will be somewhat offset by uncertainties arising from oil prices fluctuations and the COVID-19 impact, resulting in stable growth in the sector.”

The report titled ‘GCC listed banks’ results: New Age Banking (available here), analyses the results of selected listed banks in the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the Kingdom of Saudi Arabia, the State of Qatar and the United Arab Emirates. It summarizes bank’s results against selected key performance indicators for the year ended 31 December 2019 and compares these with the same information for the year ended 31 December 2018. 

© 2020 KPMG Fakhro, a Bahrain partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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