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As of first week of August 2011, we have 84% visibility in terms of market cap and 59% visibility in terms of number of companies to measure the performance of GCC corporate earnings, according to a recent report by Kuwait Financial Centre “Markaz”... Saudi Arabia enjoys nearly 100% market capitalization visibility, followed by Oman with 77% visibility. Bahrain’s visibility at 49% is the lowest in GCC region.
During 2Q11, GCC corporate earnings declined by 7% when compared to 2Q10. Total earnings, which came in at USD 12.8bn was less than the profits posted during the previous quarter (1Q11) by 7%. In 1H11, the GCC corporate earnings show an upswing of 5% compared to 1H10. Total earnings came at USD 26.5bn compared to USD 25.3bn in 1H10, mainly due to the improved performance in 1Q11.
Corporate earnings declined due to weak performance by the Telecom sector in the region. Nevertheless, Banks and Commodity companies continued to perform strongly. The region’s continued dominance as a petrochemical hub, global recovery, and spikes in commodity prices supported the performance of companies across the region.
Aggregate Net Profits from the Commodity sector were USD 3.4bn (+54% YoY, +4% QoQ). Amongst sectors, Banking continued to deliver the highest profits, at USD 5.0bn. Robust demand and access to low cost funds improved spreads in this quarter. Telecom sector registered 66% YoY decline in net income due to Zain’s one time profit from discontinued income reported in 2Q10. Excluding this one-time adjustment, the sector’s earnings fell by only 11% YoY. Real Estate sector recovered from the slump experienced last year and reported a profit of USD 386mn in 2Q11, up 127% YoY.
1H11 Earnings
During 1H11, Saudi Arabian companies posted a total profit of USD 12.7bn an increase of 25% YoY. The increase was due to higher earnings reported during the 2Q11 by all the sectors across the board. Earnings of Kuwaiti companies during the 1H11 were down 33% YoY to 2.9bn. The decline in earnings was mainly due the decreased profits reported by the Telecommunication sector in Kuwait. UAE companies reported a profit of USD 5.2bn during the half year, an increase of 5% YoY. The surge in the Banking sector performance during the year supported the increased profits.
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Qatar earnings during the first half of the year was USD 4.3bn, almost flat compared to the previous year. The banking and the commodities sectors came up with good results during the year. However, the performance of the telecommunication sector was disappointing. Oman’s corporate earnings declined 16% YoY during the first half of the year to USD 0.8bn. The decrease in profit was mainly due the low profits reported by the Banking and the Telecommunication sectors. On a like-to-like basis, Bahrain’s corporate reported a profit of USD 510mn in 1H11, an increase of 5% YoY. The increase in profit was due to the improved results posted by the Banking sector in Bahrain.
2Q11
Earnings of Saudi Arabian companies totaled USD 6.9bn, an increase of 28% YoY and 20% QoQ. SABIC, which reported USD 2.2bn in 2Q profits, led the growth which was driven by higher volumes and prices. Al Rajhi Bank reported net income of USD 491mn, up 4% YoY. Saudi Telecom’s net profit increased 9% YoY to USD 602mn. The increase in net profit is mainly on account of higher sales and lower operating expenses in this quarter.
Kuwait Corporate earnings fell by 73% YoY, due to decrease in profit reported by the Telecom sector. Telecom sector growth in 2Q10 was driven by one time gain of USD 2.75bn reported by Zain from discontinued operations. However, after adjusting for this one-time gain, corporate earnings increased by 57% YoY in 2Q11, as other sectors performed well in the Kuwait region. Banking sector was up 15% YoY, while Real Estate and Construction related companies posted positive earnings compared to last year.
During 2Q11, UAE posted earnings of USD 2.4bn as against a profit of USD 2.1bn in 2Q10. Real Estate recovery and profits from Banks led earnings growth in UAE. Bank earnings at USD 1.5bn, were higher by 33% on YoY basis. Abu Dhabi Commercial Bank led the growth in 2Q11 with positive earnings reported during the quarter compared to last year. Emirates NBD reported earnings growth of 87% YoY, due to higher other operating income.
Qatar earnings declined in 2Q11, with corporate earnings coming at USD 1.9bn, down 12% over 2Q10. Though, on a like-to-like basis the profit for the quarter was up 18% YoY. Industries Qatar delivered a strong set of numbers with net income of USD 570mn. Higher volumes and improved demand proved beneficial for the company. Bank earnings grew 13% YoY to USD 944mn. Qatar National Bank grew its earnings by 26% YoY and 6% over the quarter. QNB’s net income of USD 497mn was driven by lower cost of funds and higher NIMs.
Oman’s corporate earnings declined 10% YoY basis, though it was up by 35% on QoQ basis to USD 472mn as the Sultanate started to recover from the political turmoil that had effect it during the last quarter. Banking sector’s earnings were down at USD 94mn (-28% YoY, -38% QoQ), due to negative earnings posted by Bank Dhofar. Bank Muscat’s net income of USD 76mn was 30% higher on YoY basis and 6% on QoQ basis.
On a like-to-like basis, Bahrain’s corporate reported a profit of USD 270mn in 2Q11, an increase of 28% YoY and 13% QoQ. On like-to-like basis, Banks reported an earnings growth of 63% on YoY basis. Ahli United Bank grew its earnings over the year by 20% to USD 84mn. Net income of Bahrain Telecom suffered, declining 5% YoY, though increasing by 22% on a QoQ basis.
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About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre 'Markaz', with total assets under management of over KD 906 million as of June 30th, 2011, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997