GCC’s net profits decline by 15.4%

KUWAIT: Total earnings for GCC-listed companies declined by 15.4% in 2019 to reach $149.3 billion from $176.3 billion in 2018. Aggregate earnings for Dubai-listed companies saw the biggest y-o-y increase at 13.5% to reach $10.3 Bn. On the other hand, Saudi Arabia, which made up 72.8% of the GCC’s total 2019 net profits, reported the biggest decline in earnings by 20.5% during 2019 that reached $108.6 billion led by an equivalent decline in profits for Aramco during 2019.

Excluding Aramco’s results, 2019 earnings for Saudi Arabia declined by 20.7%, whereas that for the overall GCC it declined by 6.6%. Bahraini and Qatari companies also reported fall in net profits during 2019 by 7.1% and 5.5%, respectively. Large-cap sectors including Energy, Materials and Real Estate reported steep decline in earnings during 2019.

Profits for the Energy sector dropped by 20.3% to $89.2 billion in 2019. Energy stocks in Saudi Arabia posted a profit decline of $23.0 billion that more than offset marginal gains in the sector in Abu Dhabi, Oman and Qatar. The Materials sector reported an even bigger decline of 68.6% or $6.9 billion to reach $3.2 Bn in profits in 2019. Companies in the Materials sector in Saudi Arabia once again reported the biggest profit decline of $6.7 billion or 73.1%.

For the Real Estate sector, the decline was 20.0% during the year with profits reaching $4.5 billion. This was also a broad-based decline like the Materials sector with Real Estate sector in almost all the GCC countries reporting aggregate decline in profits in 2019. These declines were partially offset by the resilience of the banking sector that reported a 10.0% increase in profits that reached $37.2 billion in 2019 vs. $33.8 billion during 2018.

Net profits for Q4-19 witnessed a y-o-y decline of 18.6% and total profit was the lowest in the past eight quarters at $31.0 billion that came primarily on the back of a fall in earnings for key sectors.

Companies in Saudi Arabia, Qatar and Kuwait reported decline in earnings during the quarter that was partially offset by higher profits in the rest of the GCC countries. The Energy sector in the GCC and particularly in Saudi Arabia saw the listing of Aramco in December- 2019 which increased the market cap and the earnings for the listed companies in the sector multifold.That said, the sector has seen consistent decline in profitability due to the fall in oil price that has particularly affected oil exploration and marketing companies in the region, whereas most of the oil transport and refining companies reported higher profits during the year.

Total profit for the sector declined by 20.3% in 2019 that came primarily on the back of an equivalent decline in profits of Aramco. Excluding Aramco’s full year results from the group showed a profit growth for the sector of around 13.1%. The y-o-y profit growth for the Telecom sector was marginal at 1.3% in 2019 reaching $7.7 Bn. Qatari telcos reported the biggest increase in earnings at 11% after both Ooredoo and Vodafone Qatar reported double-digit growth in net profits during the year.

Kuwaiti telcos were next with a profit growth of 5.5% followed by telcos in Oman and Bahrain with profit growth of 4.7% and 4.3%, respectively. This growth in sector profits was partially offset by a decline in profits for UAE-listed telcos. The GCC Real Estate Sector, the fifth largest sector by market-cap, witnessed a 20.0% decline in yearly profits that reached $4.5 billion in 2019. The decline came after a broad-based decline in profits across the key real estate markets in the GCC. The decline in profits for Dubai-listed real estate companies was the biggest in absolute terms at $724million or 20% followed by Saudi Arabia with a decline of $200million or 87.1%. Qatar and Kuwaiti real estate aggregates also showed a decline during the year.

GCC Materials sector witnessed a 68.6% yearly decline in profits in 2019 that reached $3.2 billion vs. $10.1 billion in 2018. Out of the 78 companies in the sector in the GCC, 50 companies recorded a decline in profits during 2019. The biggest profit decliners in the sector included SABIC, Tasnee and Maaden with the combined profits declining by $5.8 billion. On the other hand, cement companies showed significant improvement in profits during the year.

The GCC banking sector once again outperformed other large-cap sectors in the region by reporting a 10% increase in net profits during 2019. This helped partially offset the overall decline in profits in the GCC. Dubai-listed banks reported the biggest profit growth during the year at 25.3% but a large part of it came from the inorganic route following the acquisition of DenizBank by ENBD. On the other hand, Saudi Arabia’s profit growth of 13.3% during the year were largely organic.

Net interest margins (NIM) remained largely flat across the GCC countries during 2019 resulting in flat NIM at the GCC level at 3.1%. Saudi Arabia recorded the highest NIMs in the GCC at 3.7% led by a relatively higher loan-to-deposit ratio as well as a vibrant lending activity due to the active project market in the Kingdom. Meanwhile, non-interest income declined in four out of the six GCC markets. Saudi Arabia and UAE reported double digit q-o-q declines of 12.9% and 11.9%, respectively, in Q4-19, whereas Bahrain and Omani banks reported growth of 27.2% and 10.4%, respectively.

Kuwait

Boursa Kuwait-listed companies reported a net profit decline of 11.9% during Q4-19 that reached $1.26 billion compared to $1.43 billion during Q4-18. The major sectors ie Banks, Real Estate, Telecommunication and Diversified Financials contributed to the decline of profitability of the exchange. Transportation was the only sector that reported marginal improvement in profits of 3.9% y-o-y during Q4-19, while the smaller insurance sector posted a much stronger profit growth of 24% y-o-y.

Net profits for the Kuwaiti Banking sector declined by 15.7% y-o-y during Q4-19 as losses reported by CBK and a decline in profits for KIB, ABK and Warba Bank more than offset growth in profits for the rest of the banks in the country. Notably, NBK reported a Q4-19 net profit of $327.03 million , a marginal growth of 0.8% primarily due to higher non-interest income and lower provisions charges for credit losses and impairment losses.

Similarly, GBK reported a net profit of $87.5 million for Q4-19 compared to a profit of $46.4 million in Q4-18 driven by higher net interest and non-interest income which were partially offset by the increasing operating expenses. The net profit of Burgan Bank surged by 48.3% for Q4-19 to reach $56.8 million compared to $38.3 million for Q4-18, due to lower operating expenses and provision charges for credit losses.

Islamic lender, KFH, recorded a net profit of $199.7 million in Q4-19 against $192.4 million for Q4-18 up by 3.8%. CBK posted a loss of $54.6 million, against a profit of KD 160.1 million in the same period a year earlier, due to increase impairment and other provisions, which were partially offset by higher net interest and non-interest income. Profits for the Telecom sector declined by 4.5% to reach $270.3 million for Q4-19 compared to $283 million for Q4-18. Zain recorded a net profit of $211 million in Q4-19 compared to $196.06 million in Q4-18 supported by increase of 26% in revenues.

On the other hand, OOREDOO, Viva and AAN Digital reported a decline in profits during Q4-19. The Insurance sector recorded a profit growth of 24% that reached $22.2 million in Q4-19 compared to $17.9 million in Q4-18. Gulf Insurance Group reported the biggest increase in profits in the sector for Q4-19 of $8.7 million compared to $4.3 million for Q4-18 mainly due to the increase in net operating income and Gross Premium written.

Moreover, Ahleiah Insurance Co posted a net profit of $7.9 million for Q4-19 against $5.8 million up by 36% supported by the increase in operating revenues. Among the top three real estate names in Kuwait, Salhia Real Estate Co posted the biggest increase in absolute profits in the sector that reached $33.03 million for Q4-19 compared to a profit of $10.43 million in Q4-18. Meanwhile, Mabanee reported 6% increase in the profit for Q4-19 that reached $46.5 million and Arab Real Estate posted $9.5 million for Q4-19.

Saudi Arabia Aggregate net profits for Saudi Arabian listed companies witnessed a steep decline of 24.1% to $22.8 billion in Q4-19 against $30.1 billion in Q4-18. Out of the top three sectors of the exchange namely Energy, Banks, and Telecommunication Services, only the Banking Sector reported an increase in profitability during the quarter. The decline in Q4-19 earnings was mainly driven by a plunge in profits for the Energy Sector that declined by 28.6% to $20 billion as compared to $28 billion during Q4-18. Profits for the other key sectors like Utilities, Insurance and Diversified Financials also declined during the quarter. On the other hand, the Retailing, Consumer Services, and Health Care Equipment & Services reported a growth in profits during the quarter that partially offset the overall decline.

Oil giant Aramco reported a net profit decline of 28.2% during Q4-19 led by declining oil prices and production volumes, coupled with declining refining and chemical margins and a $1.6 billion impairment charge associated with Sadara ChemicalCo. Excluding the profits of Aramco from the aggregate profits of Saudi Arabia showed a significant y-o-y increase in profits of around 26.6% for the rest of the listed companies primarily led by growth in profits for the Banking and Retailing sectors.

Profits for the banking sector more than doubled y-o-y during Q4-19 to reach $2.8 billion. Al Rajhi Bank recorded a profit of $573.8 million for Q4-19 against a loss of $940.7 million for Q4-18 driven by higher gross operating income, and increased commission income. Riyad Bank reported a 186.4% increase in the net profit that reached $296.2 million in Q4-19 compared to $103.4 million in Q4-18 on the back of high fee and commission income.

Meanwhile, NCB reported a 28% y-o-y increase in net profit to $903.7 million in Q419 as compared to $705.8 million in Q4-18. Net profit for the Telecom sector declined by 32.5% y-o-y to $612.04 million in Q4-19 as compared to $906.8 million during Q4-18. STC reported a 25.3% y-o-y decline in net profits that reached $619 million . On the other hand, Mobily reported losses during Q4-19 as against profits during Q4-18. Zain KSA profits tumbled 74% to reach $28.8 million for Q4-19 versus a profit of $106.4 million in Q4-18.

Dubai

Net profits for Dubai-listed companies jumped 19% to $1.8 billion in Q4-19 up from $1.5 billion in Q4-18. The increase came primarily on the back of higher y-o-y profits for the Telecom sector (+25.8%) further supported by lower reported losses for the Consumer Services sector (loss of $38.1 million in Q4-19 vs loss of $488.5 million in Q4-18) as well profits of $19.7 million for the Transportation sector during Q4-19 as compared to losses of $268.4 million during Q4-18.

The Banking sector’s Q4-19 net profits fell 20%, the second largest percentage fall among the GCC Banking Sectors, to reach $956.3 million down from $1.2 billion during Q4-18. The decline in profits for the sector was broad based as all the listed banks in Dubai, barring Commercial Bank of Dubai, reported y-o-y decline in net profits during the quarter. Profits for ENBD declined by 15.3% y-o-y to reach $550.1 million, whereas Dubai Islamic Bank reported a 19.5% drop in net profits that reached $279.8 million. Real Estate Sector net profits declined by 28.1% yo-y in Q4-19 to $743.6 million from $1.03 billion in Q4-18. Two of the six companies in the sector, namely Damac Properties and Union Properties, recorded Q4-19 losses of $46.1 million and $16.4 million, respectively.

Abu Dhabi

Abu Dhabi-listed companies saw an overall increase of 31.4% in their Q4-19 net profits recorded at $2.3 billion compared with $1.7 billion in Q4-18, the biggest increase in profits in the GCC. Only one out of the five top largest sectors of the exchange by market-cap registered a decline in Q4-19 net profits.

The Banking Sector registered a 12.1% rise in Q4-19 profits to reach $1.3 billion from $1.1 billion in Q4-18. The Food, Beverage & Tobacco sector followed the Banking Sector as the second largest absolute earnings contributor in the exchange with 188.3% increase in profits in the quarter to reach $154.3 million . In the Banking Sector, FAB saw its Q4-19 net profits rise 5.1% to $838.9 million from $798.5 million in Q4-18. The profits increase was due to an increase in non-interest income.

On the other hand, ADCB reported a 20.5% y-o-y decline in net profits during Q419 led by lower operating income. Of the eleven banks listed on the exchange, only two declared losses in Q4-19. United Arab Bank registered a loss of $111 million in Q4-19 due its recognition of over $46 million provisions including legacy issues. Moreover, Invest Bank posted a Q4-19 loss of $95.5 million compared with a loss of $351.3 million in Q4-18. Invest Bank’s decrease in net losses was attributed to a fall in operating expenses and impairment provisions.

Profits for the Food, Beverage & Tobacco sector increased to $154.4 million in Q4-19 vs. $53.5 million in Q4-18 mainly due to record profits reported by International Holdings Company. IHC’s Q4-19 net profits reached $130.5 million up from $0.1 million in Q4-18 attributed to sales increase in the quarter. The Real Estate sector’s Q4-19 earnings rose 29.9% to reach $151.4 million largely due to the robust performance of Aldar Properties Co. which saw its Q4-19 earnings jump 81% to $157.1 million up from $86.8 million in Q418. Aldar’s surge in profits was largely credited to higher revenue and improving environment.

Qatar

Total Earnings for Qatari-listed companies declined by 23.9% during Q4-19 to reach $2.03 billion primarily led by decline in profits reported by the Real Estate and Utilities sectors in addition to losses for the Capital Goods, Insurance and Diversified Financials sectors. Banks continued to outperform other sectors with an overall 28.7% surge in Q4-19 net profits that reached $1.8 billion in Q4-19 accounting for 88.6% of the overall exchange profits during the quarter. QNB reported a 19% y-o-y increase in Q4-19 that reached $969.2 million due to 10% increase in loans and advances.

Quarterly net profit for Commercial Bank of Qatar increased by 83.8% to $209.1 million in Q4-19 up compared to $113.8 million in Q418 on the back of higher operating income which grew 34% after loans and advances increased by 4.0%. Qatar Islamic Bank also saw strong growth in its net profit at 40% yo-y to reach $288.4 million in Q4-19 compared to $206.01 million supported by income from financing and investing which registered a strong growth of 15.5%.

The Qatari Telecom sector also witnessed strong gains in net profit that grew 36.0% yo-y in Q4-19 to $192.5 million compared to $141.5 million in the Q4-18. Ooredoo recorded a net profit of $173.8 million in Q4-19 compared to $129.9 million in Q4-18 up by 33.8%. Q4- 19 net profit for Vodafone Qatar stood at $18.7 million in Q4-19 compared to $11.6 million in Q4-18 a rise of 61.1% y-o-y.

Bahrain

Total net profits for Bahraini companies increased 24.2% in Q4-19 to $411.5 million from $331.3 million in Q4-18. Among the largest three sectors by market cap only the Banking sector saw its Q4-19 net profits decrease. The Banking Sector’s Q4-19 net profits fell 9.6% to $303.3 million from $335.6 million in Q4-18, whereas the Telecom sector registered 59.3% rise in profits to $23.5 million. The Materials sector also contributed to profit growth during the quarter with a profit of $37.4 million during Q4-19 as compared to a loss of $46.2 million during Q4-18.

The decline in profits for the Banking sector was largely attributed to Al Khaleeji Commercial Bank’s quarterly loss of $25.8 million in Q4- 19 compared with $2.9 million loss in Q4-18. On the other hand, National Bank of Bahrain increased its Q4-19 net profits by 21.3% to $48.3 million, the highest increase in absolute profits among the banks in the sector. NBB’s robust performance was credited to a growth in operating income and lower provision charge.

Oman

Total net profits for listed companies in Oman increased 22.6% to $323.3 million compared with $263.6 million in the corresponding quarter in 2018. The Banking Sector, the biggest sector in the exchange by market cap, saw its Q4-19 net profits decline 19.3% to $200.9 million down from $249 million in Q418 while the second biggest sector by market cap, the Telecom Sector, saw its Q4-19 profits jump by 50.4% to $83.2 million . The Energy sector, also saw it profits grow by 41.3% during Q4-19 to reach $30 million. Only three out of the fourteen sectors of the exchange saw increases in their total Q4-19 profits.