Boston Consulting Group: Banks in the Middle East flourish

While European banks are going through some of the toughest times in history, Middle East banks are flourishing. Banks in the Middle East realized a 6.9 % increase in average revenues and an 8.1% rise in average profits in 2012. Thereby largely outpacing growth in international markets. This follows from a comparison of banks’ financial accomplishments executed by The Boston Consulting Group (BCG).

Banks in Qatar saw the biggest growth in revenues at 12% while banks in the rest of the Gulf reported single growth digit rates. Banks in the UAE, Kuwait and Bahrain performed relatively the least, achieving growth in revenue of 5% or below.

"Overall Middle East banks have been developing strongly despite all of the international challenges" says Reinhold Leichtfuss, Managing Director of BCG in the UAE. Main reasons for the sector's solid performance is a more crisis-proof business model (more segregation between investment and retail banking), a more balance portfolio of financial products (generally less complex and for instance European portfolio's) and a corporate culture which is less contaminated than Western cultures.

Investing in IT

Despite the positive outlook for the strategy consultants also sound a warning for Middle East banks. "Gulf banks should not hold back on essential investment in IT and operations platforms. The large wave of change facing banks in the coming years means that there is a risk that costs will continuously outgrow revenues. More efficient operations is therefore key" according to BCG.