GCC - Banking sector in line for a result

Banking sector developments in the Gulf since the spring have been dominated by the fallout of troubled credit exposures to local and regional firms across the GCC. This has dissuaded the banks from lending to the private sector, increasing pressure on the rate of domestic economic growth.
In Saudi Arabia, for example, the availability of commercial credit to the private sector has become further constrained, with five out of the previous seven months showing a decline in lending to the private sector. In the UAE news was dominated by the disclosures regarding the banks' credit exposure to troubled Saudi groups. There was also news of a law allowing the government to guarantee the repayment of bonds and other instruments issued by banks. The largest bank in the UAE, Emirates NBD, boosted its capital ratio through a debt issue, exceeding the capital requirements of the Central Bank.

In Kuwait there was no significant development with regard to the banks' exposure to troubled firms Global and the Investment Dar, while a committee was established to investigate the restructuring of the exposure. Meanwhile, National Bank of Kuwait (NBK) increased its stake in Boubyan Bank by purchasing the shares previously owned by Kuwait Investment Authority (KIA).

In Qatar banks appeared to have minor exposure to the troubled Saudi groups. The government completed the disbursement of a real estate package, the beneficiaries of which are nine local banks which had difficulty handling their real estate sector exposure. The support package was worth 15 billion riyals (Dh15 billion). This was the third state bailout for the banking industry, covering capital injection and portfolio buyouts.