The bankers’ duel for deposits

The global financial crisis has hit Gulf banks hard. The catalysts that boosted their growth — high oil prices, a booming real estate market and strong credit ratings — have run out of steam. The challenges now are many. As the region’s equity markets tumbled, so did the banks’ lucrative wealth management services. The likelihood of additional asset write-downs has triggered concerns about banks’ balance sheets. Moreover, Gulf bankers have seen cheap wholesale funding dry up and are reluctant to lend to each other, leading to higher cost of funds and liquidity shortfalls. The region’s banks are now locked in a battle for the lifeblood of banking — retail deposits. Winning this battle may be a matter of survival. The deposit opportunity is big as Gulf investors keep over 40 percent of their financial wealth in deposits. Deposits are also a low-cost source of funds. They can cost banks as