MANAMA: The banking sector assets showed a Compound Annual Growth Rate (CAGR) of 4.03 percent and the fact that this rate of growth doubled between 2012 and 2013 suggests that a new phase of development for Bahrain banks has started which is marked by sustainable growth and increasing profitability, according to the findings of BAB-BIBF Review 2014.
“There has been a steady improvement in total assets of the Retail Conventional banking sector over the last five years with a 35 percent improvement from 2009 to 2013, while the Wholesale Conventional banks had a marginal improvement of 7 percent by 2013. The Islamic total assets have also shown an improvement since 2009 where Wholesale Islamic banks showed a growth of 32 percent compared to 2009.
“An analysis of the Assets structure shows that loans accounted for the majority of the asset base (46 percent – 2013, 47 percent – 2012). The relative composition of the assets remained stable over the last two years. Other Earning Assets form 41 percent of the asset base in 2013 and 2012.
“Non-earning assets, which have risen fractionally from 11 percent to 12 percent, are those assets that by their characteristics do not generate interest income for the bank. Generally speaking, a financial institution would prefer to minimise such assets, which are primarily composed of cash and payments from balances, premises and equipment, bank owned life insurance, intangibles and “other” assets.
“An analysis of the banks’ liabilities and equity structure shows that Deposits and Short-term funding accounted for the majority of the share, with 73 percent in 2013 and 74 percent in 2012 respectively. The Bahrain banks rely mainly on funding from deposits from customers and financial institutions and thus have the larger share. Banks in Bahrain have a moderate-to-low reliance on international capital markets and interbank funding. Equity accounts for the other major source of funding for banks, accounting for 16 percent in 2013 and 2012 respectively.
“In total customer deposits reached US$89.86 billion at the end of 2013 compared to US$77.48 billion a year earlier – an increase of 15.5 percent. The Islamic sector (including retail and conventional) has a ratio of approximately 40 percent of net loans over total assets, compared to retail conventional which has a ratio of approximately 50 percent. The wholesale conventional sector has a lower percentage of approximately 25 percent. This, however, is an improvement from 18 percent in 2009.
“The cost of money via lending rates has remained fairly static in 2014. The rate for savings is around 0.25 percent while deposits of less than three months for sums larger than BD 10,000 have generated between 0.54 and 0.61 percent. Longer term deposits have remained in a band between 0.93 and 1.13 percent. The current rate of business loans including overdraft approvals is 5.6 percent. In January this fell as low as 4.19 percent. The average for construction and real estate loans is 5.99 percent ranging from 5.42 percent to 9.5 percent.
“The rate of personal loans range from between 5.61 percent (as of October) for secured mortgages to credit cards at 18.3 percent and unsecured loans for people with poor credit records at around 22 percent. Again there is a large range of rates between providers that take many key factors into account.”