Bahrain’s banking sector has witnessed a remarkable surge in customer deposits in the second quarter of 2023, reaching $86 billion, the highest in the GCC region. This was despite the challenges posed by the rising interest rates in the global markets, which have affected the lending and bond markets.
Bahrain leads GCC in deposit growth
According to a report by Kamco Invest, a Kuwait-based investment company, Bahrain-listed banks reported a 5.4% quarter-on-quarter increase in customer deposits as of end Q2 2023, the biggest growth rate among the GCC countries. The report analyzed the financials of 58 listed banks in the GCC for the quarter and found that total customer deposits in the region grew for the ninth consecutive quarter to reach a new record high of $2.3 trillion, up from $2.28 trillion at the end of Q1 2023.
The report attributed the growth in customer deposits to several factors, such as:
- The strong economic activity and business confidence in the region, supported by robust project pipelines and government initiatives.
- The attractive deposit rates offered by some banks to attract and retain customers amid the rising interest rates.
- The increased liquidity and stability in the banking sector due to the regulatory measures and reforms implemented by the central banks.
Bahrain’s lending and profitability also improve
The report also noted that Bahrain’s banking sector saw an improvement in lending and profitability during Q2 2023. The aggregate gross loans of Bahrain-listed banks grew by 2.5% to reach $58 billion, mainly driven by the corporate and retail segments. The report stated that higher interest rates supported the net interest income of Bahraini banks, which reached $1.1 billion, up from $1 billion in Q1 2023.
Moreover, the report highlighted that Bahraini banks recorded a partial recovery in their net income, which reached $281 million in Q2 2023, up from $269 million in Q1 2023. This was due to lower loan loss provisions, which declined from $67 million to $60 million, as well as higher non-interest income, which increased from $197 million to $209 million.
Bahrain’s banking sector outlook remains positive
The report concluded that Bahrain’s banking sector outlook remains positive for the rest of 2023, as the country continues to diversify its economy and enhance its competitiveness. The report stated that Bahrain’s banking sector is well-capitalized, liquid, and resilient to withstand any external shocks or volatility. The report also praised Bahrain’s efforts to promote innovation and digitalization in the banking sector, such as launching open banking services and fintech initiatives.
