(MENAFN - Qatar News Agency) Credit facilities went up by 12% in 2012, supporting the expansion in total banking assets by 8% in 2012.
Loans to the construction sector form the largest portion of credit facilities in the UAE and after declining in 2010-11, started to pick up in 2012.
Additionally, credit facilities to other major sectors, such as the public sector and wholesale trade, also increased in 2012. Saudi Arabia has the second largest banking assets in the GCC at US462bn. Credit facilities went up by 17% in 2012 as loans for trade and manufacturing grew.
Kuwait's credit facilities grew a slow pace of 4% in 2012, driven mainly by the increase in loans to the construction and real estate sector. Oman experienced strong growth in bank financing which went up by 14% in 2012 as personal and public sector loans increased.
The banking systems in the GCC region have remained relatively sound even with strong growth in the balance sheet of banks. This is mainly due to the good asset quality of GCC banks as the non-performing loans (NPL) ratio has remained low for the GCC region. The NPL ratio for GCC banks stood at 4.5% for 2012, according to private agency data.
Apart from traditional bank financing, corporate debt capital markets have also emerged as a good funding option for governments and corporates in the region.
While bank financing has traditionally been the preferred source of funding for GCC government and institutional borrowers, they have in recent years started to diversify their funding sources, through access to the capital/bond market. In 2012, a total of 919 bonds were issued in the GCC amounting to US111 Billion.
This is in comparison to the US107 Billion in credit facilities that were granted by GCC banks. Even as bonds have emerged as an alternative, bank financing will remain as the primary source of funding for institutional and corporate borrowers, according to QNB Group.