Banks across the Gulf Cooperation Council nations will make total provisions of $9.4 billion against their 2009 accounts, a 40 per cent increase on the year before, according to a new study by the Kuwait Financial Centre.

This is a five-fold surge in total write-offs of just $1.8 billion in 2007. For 2008 the GCC banks took a more cautious view and made provisions of $6.7 billion.

The impact of the 2008 surge in write-offs was felt across the board in the Gulf in a stagnation of bank lending and a hoarding of cash to repair balance sheets. The study estimates that GCC bank loans will show four per cent growth in 2009, far below their historic average of 29 per cent from 2003-8.

For 2010 the Kuwait Finance Centre forecasts an eight per cent growth in total loans in the region with ‘Saudi Arabia and the UAE to be a drag on overall GCC loans’ growth’.

The fact that banks are starting to write downs bad loans and take the profit and loss hits, we believe this is a healthy sign that recovery is happaneing. What we dont know yet is how long will these writedowns continue?

Fresbee
IC