As of third week of May 2011, we have 96% visibility in terms of market cap and 78% 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”... Qatar enjoys nearly 100% market capitalization visibility, closely followed by Saudi Arabia with 99% visibility. Bahrain’s visibility at 70% is the lowest in GCC region.
During 1Q11, GCC corporates posted a good set of numbers with earnings growth of 19% when compared to 1Q10. Total earnings, which came in at USD 13.8bn, were more than double the profits posted during the previous quarter (4Q10). The highest growth was in Kuwait which saw a sharp rebound in earnings, coming in at USD 2.1 bn, a near doubling from 1Q10. Saudi earnings held strong, with a 23% growth while UAE was flat. Corporate earnings were driven by strong performances from Commodity companies and Banks. The region’s continued dominance as a petrochemical hub, global recovery, low cost advantages and spikes in commodity prices augured well for companies across the region.
Aggregate Net Profits from the Commodity sector were USD 3.3bn (+51% YoY, +28% QoQ). Amongst other sectors, Banking continued to deliver the highest profits, at USD 5.2bn. Robust demand and access to low cost funds improved spreads in this quarter. Telecom sector registered 50% YoY growth in net income due to Wataniya’s one time fair value gain of USD 962mn. Excluding the one-time gain, the sector’s earnings fell 5% YoY. Real Estate sector recovered from the slump experienced over the last few quarters.
Earnings of Saudi Arabian companies totaled USD 5.8bn, an increase of 23% YoY and 9% QoQ. SABIC, which reported USD 2bn in 1Q profits, led the growth which was driven by higher volumes and prices. Al Rajhi Bank reported flat numbers with net income of USD 453mn. Saudi Telecom’s net profit declined 11% YoY to USD 419mn. The drop in net profit is mainly on account of higher other non-operating expenses in this quarter.
Kuwait recorded strong earnings growth this quarter on the back of sluggish last quarter performance. Corporate earnings grew 98% YoY, supported by recovery in the financials, commodities and telecom. Telecom sector growth was driven by one time gain of USD 962mn at Wataniya in addition to support from Zain’s 42% YoY net income growth. However, Zain’s bottom line was 19% lower than 4Q10 number due to foreign exchange losses. Although Kuwait’s Banking sector profits were almost flat over the quarter, YOY growth was at a healthy 41%. National Bank of Kuwait registered net income growth of 11% YoY to USD 291mn.
During 1Q11, UAE posted earnings of USD 2.8bn as against a loss of USD 1.7bn in 4Q10. Real Estate recovery and profits from Banks led earnings recovery in UAE. Bank earnings, at USD 1.7bn, were higher by 11% on YoY basis and 68% on QoQ basis. Abu Dhabi Commercial Bank and Emirates NBD led the growth in 1Q11 with their earnings growing by 163% and 27% over 1Q10. NBAD’s profits were down 10% YoY due to higher provisions booked by the bank. Real Estate recovery in UAE was led by profits of USD 51mn at Aldar properties after its loss of USD 3.5bn in 2010. Emaar Properties’ bottom line came in at USD 115mn, down 45% YoY due to lower deliveries.
Qatar maintained its earnings momentum with USD 2.4bn in corporate profits, a growth of 13% over 1Q10. Here again, the growth was led by commodities (+72% YoY, +38% QoQ) and banks. Oman’s corporate earnings declined 26% YoY basis and 34% on QoQ basis to USD 338mn as political turmoil has rattled the Sultanate. Banking sector’s earnings were stable at USD 147mn (+10% YoY, +6% QoQ). Bahrain’s corporates came back from red to register USD 315mn of profits in 1Q11 (Market Cap visibility at 70%). However, profits were 10% lower when compared on YoY basis. The recovery is led by increase in bank profits over the quarter.
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About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre 'Markaz', with total assets under management of over KD 960 million as of March 31st, 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