Saudi Gazette - Gulf Islamic banks outgrowing conventional peers

Saudi Gazette - Gulf Islamic banks outgrowing conventional peers:

"Islamic banks in the Gulf Cooperation Council (GCC) are likely to grow faster than their conventional counterparts and increase their share of GCC banking system assets for the foreseeable future, Standard & Poor’s Ratings Services said in a report published Tuesday on RatingsDirect titled “Gulf Islamic Banks Continue To Grow Faster Than Their Conventional Peers, But Profitability Rates Are Converging.”

However, profitability rates for the two banking models are converging as Islamic banks are taking a more pronounced hit from lower interest rates and non-core banking revenues than their conventional peers because they traditionally operate with larger bases of non-interest bearing liabilities.

“We think Islamic banking will continue to increase its market share in the Gulf, and we expect the operating environment over the next two years to remain supportive for Islamic banks’ credit quality,” said Standard & Poor’s credit analyst Timucin Engin. That said, low interest rates and lower capital market-related gains than 2008 pre-crisis levels are impairing revenue growth for most Islamic banks in the region, leading to profitability convergence with their conventional peers."

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