The UAE’s banking sector has recently been crowned the largest market in the GCC by total assets, valued at $336 billion. The IMF believes the “financial system remains sound,” even though external borrowing by financial institutions and big corporations has tripled from 2004 through the end of 2006, reaching $80 billion. The IMF holds back from sounding any alarms, as the UAE’s large net creditor position suggests  there is no reason to worry.

The bursting economy of the UAE is mainly due to population influx, considerable infrastructure projects, and increased oil prices. Mihir Marfatia, author of a Global Investment House (GIH) report published in March 2008 believes, “High oil price revenues are a major benefactor to [the banking sector which is] benefiting from a booming economy.” The increased demand for sharia-compliant banking services is also positively influencing the banking sector.

The US subprime mortgage calamity is a hot topic throughout the global financial sector — yet the majority of banks in the UAE have been unaffected, as according to Fitch Ratings, the “UAE banking system seems to be less exposed to the turmoil than the Bahraini sector, where a number of banks have reported significant losses.” Fortunately, the UAE economy has vanquished most external negativity, allowing its economy to rocket further. Marfatia added that: “These boom times are creating strong investment-led growth, a rapidly expanding population and a recovery in fee income.”

In May 2008 Fitch Ratings released a report United Arab Emirates Banks: Annual Review and Outlook, analyzing the overall performance of the UAE banking sector. Fitch Ratings states that as the banking sector is “benefiting from a benign operating environment and a strong demand for credit, operating profits for most banks grew in double digits.”

Further, GIH brings to light the factors aiding efflorescence of the banking sector: “The considerable project pipeline in the UAE is also providing ample finance opportunities for the Emirates’ leading institutions. In addition, a favorable demographic profile is accelerating urbanization and infrastructure investment, providing impetus for corporate and consumer lending portfolio growth.”

While the banking sector flourishes, there are some factors to be wary of. Fitch Ratings rightfully highlighted that UAE macro-economic indicators suggest “the banking system is highly exposed to risks associated with rapid credit growth, excessive property price increases (and to a lesser extent stock market exposure), and high inflation.” Overall the banking sector is exceptionally robust, but the IMF notes that it faces challenges ahead.

Total UAE bank assets ($ billions)

Key performance measures

Bank performance

At present, Fitch Ratings states that the UAE banking sector “continues to benefit from the buoyant economic environment it mainly operates within.” The banking sector’s net income greatly increased by a healthy 26% year-on-year growth, reaching record highs of $6.53 billion in 2007. Overall, the performance of banks in the UAE “have been very encouraging, with all banks (with the exception of ADCB) experiencing double-digit annual growth in operating income during the year.” The Index of Economic Freedom 2008 reckons that six major banks in UAE account for 70% of total assets. According to Fitch, the net interest of banks operating in the UAE swelled by an average of 26%, and “[for] almost all banks, it remained the main source of income.”

The UAE tops its fellow GCC members, possessing the highest penetration level in the banking sector in terms of assets, loans, and deposits. Abu Dhabi-based investment bank The National Investor (TNI) trusts that such soaring levels of banking penetration “is reflective of the relatively developed nature of banking infrastructure in the UAE.” Between 2003 and 2007, assets to GDP of banks witnessed a sturdy increase from 118% to 180.2% respectively. Banks’ deposits to GDP also saw a substantial increase, from 76.4% in 2004 to a whopping 105.6% in 2007, “and credit penetration, i.e. loans to GDP ratio increased from 75.2% in 2004 to 105.3% in 2007,” reports TNI. Currently, UAE deposit penetration ranks highest among all other GCC nations.

Fitch firmly believes that “banks with domestic retail franchises continue to benefit from increasing demand for consumer credit, where wider margins can be charged.” For example, the National Bank of Ras Al-Khaimah (RAK) bears considerably higher net interest margins than other banks in the UAE.

The banking sector is dominated by the recent birth of Emirates NBD (ENBD), a merged entity of the UAE’s two leading banks — Emirates Bank International (EBI) and the National Bank of Dubai (NBD) — in 2007. In terms of asset size, the merger recently surpassed Saudi-based National Commercial Bank, becoming the largest banking entity in MENA region. (It is imperative to note that the merger is still in its final phases, as EBI is still independently operating in some aspects. Regarding total assets, with $39.5 billion EBI ranks second in the UAE. The last phase of the merger includes de-listing EBI and NBD from the Dubai Financial Market.)

As a necessary trend to follow, bank mergers assist the government’s diversification plan involving colossal infrastructure projects. TNI firmly states that, “size is the key with respect to project execution and scalability.” TNI views the merger as highly beneficial “by way of cost and revenue synergies as well as help the merged entity to fund such large ticket projects at competitive pricing.” Due to an increase in demand growth and corporate and retail loans, Q1 profits in 2008 weighed in at $324.5 million, up 37% from the same period last year. ENBD rules in the UAE with total assets measured at $69.2 billion, and according to TNI are “expected to grow at a CAGR of 21.8% during [2007-2011].” The enormous ENBD amalgam makes competition slightly difficult for other UAE banks.

Coming in third place, the National Bank of Abu Dhabi (NBAD)’s total assets for 2007 rang in at $37.9 billion. Better known as the ‘bank of the Abu Dhabi Government’, TNI notes that NBAD capitalizes from both government and public sector companies. First quarter profits for 2008 rose 45% from the Q1 of 2007, reaching $238.3 million. TNI reports that NBAD should expect a CAGR growth of 20.5% in fee income for 2007-2011. “The thrust towards consumer lending has benefited the bank during the last three years… the consumer loan has increased by 19% to AED14.3 billion [$3.9 billion] in 2007” asserts TNI. At present, NBAD is making efforts to diversify its non-interest income by increasing fee related business. TNI ensures that the bank “is well positioned to benefit from the current economic boom in Abu Dhabi.”

National vs. foreign banks (asset size)

National domination

With a population of 4.5 million and 49 banks, the UAE is rather ‘overbanked’. Currently, of these banks, 22 alone are national banks while the remaining 27 are foreign banks. And let’s not forget the 65 representative offices of other foreign banks throughout the UAE, as well as two specialized banks. Emirates Bank Group highlights that the UAE has “one of the highest ratios of bank branches / presence population.” Although there are more foreign banks than local ones, the latter largely surpasses the former in overall performance. The market share of domestic banks increased from 78.7% in 2003, and by September 2007 had reached 82%.

While national banks are outperforming foreign banks, especially in terms of credit growth, “one might feel that the [domestic banks] must be having a tough time in sustaining the current position in the UAE market,” according to the March 2008 Global Investment House report. More bad news for foreign banks is they are restricted from operating more than eight branches, whilst national banks are not subject to any such regulations.

Though outnumbered, domestic banks have an unbeatable edge over foreign banks. Seeing as there is no homogeneous taxation policy for banks throughout the UAE, national banks are exempt from any tax operations within the UAE. Foreign banks are not as lucky and are subject to a 20% tax on all profits.  The IMF suggests extending liberalization policies to non-GCC foreign banks, thus permitting them to benefit from the thriving economy, as currently GCC banks have the advantage, especially regarding credit growth.

An April 2008 report Exciting Times Ahead by TNI states that internal banks are able to dominate the sector “as they have access to the UAE government surplus funds”.

Although the UAE has been under pressure from the WTO to liberate the banking sector to allow foreign competition, TNI doubts any such action will occur in the near future. But, TNI observes, “local banks are scaling up their operations and are expanding their footprint locally and regionally to combat the increased competition.”

Even more good news for national banks: TNI identified that UAE national banks account for approximately 75% of the banking sector’s total assets. With the perks of government on their side, domestic banks will continue to reign over the banking kingdom.

United Arab Emirates bank ratings at May 2008

Current United Arab Emirates bank government ownership

Inflation on the rise

The banking sector’s most noted challenge to growth is undoubtedly the continuous rise of inflation. The UAE economy was smacked with a 19-year peak of 9.3% inflation rate in 2006, and soared further in 2007 to 10.9%. According to Zawya Dow Jones, inflation velocity is expected to surge to possibly reach a dangerous height of 12% in 2008. Investment bank Merrill Lynch cautioned that such a staggering increase is unavoidable “unless the dirham is re-valued or de-pegged from the US dollar.” The UAE government is bravely attempting a target of 5% inflation for 2008, but in reality this goal is acutely unattainable.

The UAE’s endeavors to fight inflation involve tightening monetary policies and cutting interest rates. Given that all GCC currencies have been pegged to the US dollar since 2003, shielding options are rather restricted as central banks of the region are required to emulate the US Federal Reserve’s policy.

In line with Federal Reserve reductions, Central Bank of the UAE (CBUAE) cut its discount rate in 2007 and “is expected to continue to move in step with US dollar rates, given that the UAE dirham/dollar currency peg still holds,” according to Fitch Ratings. What’s worse is that “high inflation has put the peg under pressure, and Fitch expects that any potential revaluation of the currency would be coordinated with other GCC states, as preparation for a GCC currency is still ongoing,” albeit, Fitch subtly notes, “the official target date of 2010 looks unlikely.”

At a time when, according to OBG, the “US economy’s fundamentals are precisely the opposite of the Gulf’s,” the dwindling muscle of the dollar has jeopardized the ambition of a GCC monetary union by 2010. OBG notes that “the varying effects of the weak dollar and the high price of oil have strained solidarity among the [GCC] members.”

Mohsen Khan, IMF Director of the Middle East and Central Asia believes, “At the moment, since inflation is not driven by dollar depreciation, focusing on de-pegging or revaluation is not the solution.” Contrarily, other financial experts consider that by making imports more expensive, the dollar peg plays a key role in driving inflation rates in the UAE as well as throughout the GCC as a whole. The paramount downside to revaluation, explained Khan, is that Gulf states risk suffering approximately a $400 billion loss in their holdings value, “if they were to revalue by [only] 20%.” Without a doubt, CBUAE needs to create an anti-inflation strategy in order to tackle the banking sector’s primary dilemma. 

Transparency concerning the veridical level of inflation in the Emirates is rather limited. In February of this year, the government of the UAE revealed it intended to kneel to long-term pressure imposed by the IMF and agreeing hereafter to publish a monthly consumer price index (CPI) rating. “However,” the Oxford Business Group (OBG) notes, “there is some debate as to whether the CPI basket currently used will give an accurate reflection of the true picture for UAE residents. Economists say up to 50% of local inflation is directly attributable to increases in rents, whereas the basket allocates only 36%.”

Country forecast

Basel II

As of January 2008, banks operating throughout the UAE were required to implement Basel II, a standardized regulatory accord to credit risk. The CBUAE has worked alongside UAE and other GCC banks in order to efficiently utilize the principles “giving due consideration to points of national discretion under Basel II.”  Fitch Ratings believes that the 2008 implementation of Basel II “has had a moderately negative impact on most banks’ capital ratios given the charge for operational and market risk.” Under the auspices of Basel II, the large UAE banks “are aiming to maintain capital ratios… at 12%-15%,” considered sufficient by Fitch. In the big picture, Basel II should aid transparency regulations as well as management of credit risk.

Forecast

Mainly thanks to mammoth infrastructure projects, real estate investments, expanded bank investments, high oil prices, monetary liquidity, and consumer spending, the UAE banking sector has seen vigorous growth. TNI trusts that the “contribution of UAE’s banking assets to the aggregate GCC banking assets as at end 2007 stood at 40.5%.” Fitch reports that UAE banks will continue to enlarge their branch networks in order to “remain competitive and attract retail customers.” With Emiratization efforts being made, talented UAE nationals are being urged to join the banking sector. Many banks are providing programs aimed at informing new graduates of the new developments, issues, and services of the banking sector. With such opportunities, the banking sector is only sure to flourish from here on out.

TNI expects collective assets of UAE banks (specifically ENBD, NBAD, Abu Dhabi Commercial Bank, Mashreq Bank, RAK, First Gulf Bank, and Union National Bank) to increase at a compound annual growth rate of 20.1% in the coming four years. Profitability is predicted to persist “in 2008 at broadly the same levels as in 2007,” given the UAE’s propitious operating environment.

Although tackling inflation is a challenge for UAE banks, their performance is rather stellar. Sallie Krawcheck, CEO and Chairman for Citi Global Wealth Management believes that the “best is yet to come in the Middle East… and the UAE is making quite a significant impact on the global economy.” The future of the UAE banking sector looks exceptionally positive, and trends of profitability are expected to remain sound.

E What are the top three most challenging issues CBD faces today? How can they be solved?

Without hesitation, I think that the number one issue is hiring and retaining quality employees. The business has been growing at such a fast pace; CBD as an example has been doubling its business in the last 18 months. New banks have been established, and UAE nationals in particular are in high demand. There is a responsibility for all banks to recruit, train and retain them, but it’s not easy as there are so many good opportunities for young people entering the field.

Another important challenge is inflation. I believe that inflation, more and more is becoming a critical issue, and it’s become more difficult to control imported inflation. The UAE does not have an independent monetary policy as it is following the US in relation to the dollar-peg. Fighting the double-digit inflation in the UAE with a 2% interest rate is very difficult. Inflation affects peoples’ daily budgets and it means that debt-service ratios are no longer representing the appropriate level at which people can actually bear debt and repayment of debt.

When people came here a few years ago, there were good opportunities to save, in particular for foreigners; today it’s getting more and more difficult for people to actually make ends meet. For companies, the cost of doing business has increased significantly, and imported inflation is partly responsible.

E Human Resources are a continuing issue for regional banks. How does CBD ensure to acquire and retain highly qualified staff and management? What internal training programs does CBD have? Do you have programs supporting Emiratization?

Let’s start on the level of management and leadership. About 18 months ago we deliberately started a very innovative leadership development program where we complete 360-degree reviews of our managers. We supply direct reports to give input to the managers — how they felt about the climate, how they felt they were supported in their career development, in their jobs, in their personal growth. Based on this, we’ve organized workshops where the top 75 managers of the bank are trained in applying different styles of leadership depending on the environments and the situations they are faced with. We emphasize that there are different leadership styles which can be applied in different situations and, as a good leader you need to be able to use those styles when they are required. The changing leadership culture has a major impact on the people working in the different departments.

Second, training and development of people is a very important element of our Emiratization drive. We have extensive training programs set out for both internal training as well as external training. We have an entire floor of our building completely dedicated to training, not only training of our own people, but also external young Emiratis. We train them just to make sure that they are prepared for professional life in society. It is partly a social responsibility, and partly our own teams that are being trained.

Emiratization is an important issue for us. We have one of the highest Emiratization rates of all banks. We gave special attention to ensure that when young UAE nationals come to our bank we prepare them though induction programs for each level, ranging from those with a high school diploma to university graduates.

Another element is the right incentives. We are one of the few banks that have introduced long-term incentive plans for the top layer of our bank. We have KPIs — Key Performance Indicators — objectives that actually cascade down to the lowest level in the organization. It’s relatively easy to do that at the top level, but at the lower levels it’s complex to measure; it’s complex for people to understand what the KPIs are and how they are measured objectively. We went through the process and I think it made people feel more engaged with what the organization is all about. This serves to provide very clear alignment and much more transparency in terms of why some people receive a higher bonus, or a higher salary increase than others.

When Emirates Bank & National Bank of Dubai merged everybody said it was the start of the mergers and acquisitions (M&A) phase in UAE, and that it was in preparation for the liberalization of the market and the penetration of the big banks like HSBC or City Bank, which were expected to become much more aggressive once the market liberalized, but then nothing happened…

I tend to disagree with what everybody said. Typically, in the West, mergers are driven by a desire for higher returns or more efficiency.  Here, if you look at the efficiency ratio or cost to income ratio of banks, we’re talking typically between 30-35%. If you look at Europe, banks are typically between 60-65%, so banks here are already quite efficient.  Then, if you look at the returns, a return equity of 20-25%, which is higher than the returns in the West, is not unusual here. So, it’s not yet the time for shareholders to look at mergers from that perspective.

However, I do believe that Emirates and NBD have set a very important example in the region, as we now need larger banks. One of the reasons is that our projects are becoming larger and larger, and the region should be able to depend on its own banks to a large extent.

If I look at the years to come, I do believe that in the next two to three years we will see a fair amount of consolidation. The Basel II requirements, the corporate government requirements, will require higher degrees of professionalism and for smaller banks it’s difficult and costly to achieve that on their own.

E Lebanon is a small country where banks have much smaller assets, and obviously less profitability. They are able to expand and to penetrate new markets whether it’s in North Africa, or Sudan, or other parts of the region. But we haven’t seen this yet with huge banks in Emirates for example. How can one explain this?

We must look at this from both sides. Let’s start with the GCC side: the returns here are still so high, and the market is growing at such a rapid speed, there is a lot of business for everybody. So the incentives to look outward are not as strong as they are in Lebanon. The Lebanese market is a very peculiar market. It’s a relatively small market and you have a lot of very good banks with well-trained people. Realizing that their market is relatively restricted, Lebanese banks have been innovative in going out into markets that show higher-risk profiles, but because of the depth of the management that many Lebanese banks have, they are able to mitigate those and do profitable business.

Eventually, I believe we will see cross-border mergers and acquisitions in the region, but typically the case is that first we’ll see consolidation within the country, and after a strong entity is established we’ll see cross-border mergers.

E In an increasingly competitive environment, M&A strategically benefit most banks. Is CBD planning to merge with any banks in the UAE?

I think every CEO of a relatively large bank, as part of his agenda, must look at inorganic growth, in other words, acquiring. CBD, because of its shareholder structure, is very keen about keeping destiny in its own hands. We would like to be on the acquiring side.

For us, it’s important to see that what we acquire will fit our strategy. If we execute an M&A transaction, we should then be able to export the specific knowledge and the specific strength that we have into any entity that we acquire. It’s not about just expanding, we have a very distinct strategy that is about family-owned business — both middle-sized and large-sized — it’s about wealth management. We service, through wealth management, the owners of these family businesses and the management of these family businesses.

E What are the pros and cons of financial sector liberalization? How will CBD be affected by liberalization? How does CBD plan to utilize this liberalization?

Liberalization is a good thing. It will bring all of us to a higher level, and it forces us to provide better quality service to our clients. When we have international banks coming in it just means we have to work a little bit harder to ensure that we provide service that is comparable or better in terms of quality. I think liberalization will bring better personnel, more professionalism, better client service, and more competition. I do believe, however, that there are distinct client sectors that national banks will focus on, and distinct client sectors that local banks will focus on.

E What does CBD believe are the best policy options to fight the increasing inflation rates at present?

Apart from the monetary policy mentioned before, I would say that the short supply, high demand, and liquidity have increased inflation. Now, what do we do as a bank? In terms of judging credit risk and looking at the capabilities of people to repay, we are very clear about not wanting to bring people into financial difficulties. Our consumer lending is relatively conservative and that’s not only to protect the bank, but also to protect our clientele.

Regarding our corporate clients, it’s about making them aware of what’s happening around them; making them aware of what’s happening to their suppliers, their buyers, and the market as a whole. It’s really about understanding the business, being a good business partner, and advising the business owner. We feel that this is an added value to the relationship, which is why we often become the main bank for many of our clients.

E How is CBD giving back to the community? What are the CSR initiatives you are supporting & why?

We are a bank that has been here for nearly four decades. We are really an integral part of society. We have a strong desire to achieve and maintain a high Emiratization ratio, not just to meet the numbers, but to make sure that we prepare UAE nationals for careers within our bank as well as outside. Even if people leave us, hopefully they will have had a good experience and they will come back to us as clients at the end of the day.

It’s about making sure that we give back to society through that. We don’t advertise this, but we have been a very significant contributor to the Dubai Cares Program; we’ve contributed 20 million dirham [$5.45 million]. Moreover, we have for many, many years contributed to a large number of organizations which help disabled, orphans and underprivileged. It’s not just about giving money, it’s about really participating. I am very proud to say that our staff actively participates in blood donation programs in a stand against poverty. It creates engagement — it makes people feel more connected to their bank. 

E What are the keys to strengthening the institutional framework of the banking sector in the UAE? To what extent are Basel II and WTO implemented throughout the regulatory framework of CBD?

More than ever, the need for a fast implementation of Basel II has been proven by what has happened in the US subprime crisis. Basel II is not only about compliance with the rules, it’s about improving risk-management capabilities, improving risk-management awareness within the banking sector, which is very important. Many of the central banks in the region are quite proactive and I think that banks have been given the proper timeline to adjust to it.

E What role does corporate governance play in CBD?

We are very keen to follow corporate governance guidelines. We have very clear internal controls in place, which ultimately ensure that the financials that we publish as a company are indeed transparent and are projecting reality. I think the transparency aspect is particularly important in the corporate governance guidelines because we have many shareholders and we don’t want to privilege the larger shareholders over the smaller shareholders. CBD has always been one of the first to come out with the quota results; we’ve actually won awards for that. We have a committee within the bank that has been implementing corporate governance according to the standards and regulations that have been issued.

E Does CBD have plans to expand regionally and/or internationally? If so, to which countries, and why?

Every CEO, particularly of the most significant banks, has been looking at expansion inorganically as well as organically. I think the priority for us would lay first within UAE because a lot of opportunity remains in UAE, and the returns are still significantly higher here than other parts of the region. We also scan the market internationally, but at this moment there is nothing specific that we are looking at. Whenever you have an expansion strategy you must be ready in terms of depth of management, and if you buy a stake in a bank you must make sure that it fits into your strategic framework.

E What is CBD’s perspective on GCC countries de-pegging their currencies from the US dollar? How will valuation against a basket of currencies affect CBD?

In all fairness, de-pegging is not really the discussion, the way I see it. The discussion is much more about monetary policy. I can understand that if you have a lot of your assets invested in dollars you don’t want them to devalue from one day to another, so I appreciate why certain governments have expressed their reluctance. However, to have an independent monetary policy in a country that’s going through a strong growth phase is important. You cannot follow the same monetary policy of a country that is sliding into recession or already is in recession, that being the US. For me, de-pegging is a little less important on the agenda than monetary policy.

The GCC has enjoyed vigorous growth in the banking sector, with the exception of Saudi Arabia that suffered the aftershocks of the 2006 downturn in its stock market. These profits have been driven by record high oil prices across the region, better regulation practices (e.g. Basel II), financial diversification, and nationalization.

Basel II acts as an internationally standardized regulatory accord to manage credit risk, improve transparency, and strengthen the overall stability of financial systems. The GCC’s recent implementation of Basel II will alter how banks lend money, and to which countries they lend it to. With this standard on their backs, banks will have to invest abundantly to upgrade their IT systems and consultancy fees in order to comply with the new regiments. Basel II compliance will also encourage banks to liberalize their policies, be more transparent with their balance sheets and to manage their risks more effectively.

Floating on crude

With crude oil pushing $130 per barrel, the Gulf is awash with liquidity. Such an overflow of liquidity means customers have more money to place in banks, thus driving their desire for better services. The soaring liquidity has bred inflation. Inflation rates across the GCC are high, with Qatar hitting a record of 14.81% in March of 2007. Finishing in second place is the UAE, with inflation rates expected to reach up to 12% in 2008. Oman ranked third with inflation rocketing to 11.5% in 2007, but it is expected to come down this year. Inflation in Kuwait also soared from 4.4% in 2007 and is anticipated to climb to 6.6% in 2008. Saudi Arabia falls right behind Kuwait, with probable inflation of 6% this year, up from 4% last year. With the lowest rate across the GCC, Bahrain’s inflation is expected to rise to a mere 4.5% this year, up from 3% in 2007.

The high liquidity and resulting inflation plaguing the GCC has lead to renewed talk about severing ties with the ailing American greenback. While Kuwait removed its dollar peg in May 2007, it remains the only Gulf country to have done so. The move came as a surprise as most analysts had expected a more unified approach to the issue, especially with the idea of a joint GCC currency still being floated. It appears that the de-pegging has had two effects on the Kuwaiti economy. First, it has helped to curb inflation somewhat, although rising real estate prices have done much to cancel the effect. Second, the move has cut into Kuwait’s oil profits by $2.9 billion in 2007, according to a study by Aljoman Centre for Economic Consultancy. Apparently, the loss resulted from reduced oil income calculated in dollars. This development may make it even more difficult for the rest of the GCC countries to de-peg their currencies before the anticipated joint currency in 2010.

GCC top 10 banks in assets

Index of economic freedom 2008

Banking penetration GCC

Diversification necessary

Other issues in the GCC banking sector include the need for diversification. Most of the Gulf countries practice heavy-handed protectionism. For example, the UAE levies 20% tax on profits for foreign owned banks, but local banks pay nothing. This has understandably limited foreign direct investment and limited the market. Other countries, like Oman, have opened their doors to foreign financial institutions, driving up standards and pushing the economy forward. Furthermore, nationalization has been and will continue to be an issue. Countries like Saudi Arabia are working hard to qualify and employ their indigenous human resources in the banking sector. Perhaps moves like this will not only benefit the sector, but ultimately help to solve social woes as well.

Having avoided the rest of the world’s economic downturn and the resulting credit crunch, and by slowing tackling their own homegrown challenges, the GCC’s banking industry is poised to continue make strong profits on the back of record high oil prices. The region’s financiers are certainly smiling… all the way to the bank.