Dubai, UAE – The GCC region’s listed corporations reported record aggregate profit in 2022, with almost all regional countries experiencing significant GDP growth following recovery from the COVID-19 pandemic.
According to a new report by Kamco Invest, net profit reported by the companies jumped to a record high of US$ 273.3 billion in 2022, compared to US$ 199.0 billion in 2021. The energy sector alone witnessed US$ 74.2 billion, or 37.3 percent growth, mainly on the back of a steep jump in profits led by Aramco because of higher crude oil prices and higher volumes.
Manufacturing activity showed a consistently growing trend, especially in Saudi Arabia and the UAE, where the PMI remained comfortably above the growth mark while Qatar showed a slowdown only during the second half of the year.
Continued lending growth by banks in the region was another indicator of increasing investments in businesses during the year.
The banking sector came in second, with a net profit increase of US$ 8.7 billion to US$ 44.4 billion. led mainly by higher net interest income as interest rates saw one of the fastest increases during the year, both globally and in the region.
The capital goods sector came in third with profit growth of US$ 7.3 billion to reach US$ 11.6 billion led by higher y-o-y profits for recently listed Multiply Group and Alpha Dhabi Holding during the year.
The report revealed that the quarterly earnings performance for GCC-listed companies was also positive, but with a modest y-o-y growth of 7.0 percent, whereas when compared to Q3-2022, profits declined by 20.8 percent to reach US$ 56.4 billion during Q4-2022.
The y-o-y quarterly profit growth was also led by higher profits for capital goods, energy, and banks, which more than offset the US$ 3.2 billion decline in profit for the materials sector that was mainly due to lower average selling prices that affected profits in the petrochemical sector.
Q4 decline
According to the report, the q-o-q decline in profits during Q4-2022 was seen in five out of seven markets in the GCC, with all recording double-digit declines.
For example, the Omani companies reported the steepest decline during the quarter (-63.8 percent).
Kuwait, on the other hand, reported the biggest q-o-q growth in profits at 27.4 percent reaching US$ 1.8 billion, followed by Bahrain, which recorded a similar growth of 26.4 percent.
In terms of sector performance, energy companies recorded the steepest q-o-q decline during Q4-2022 mainly led by the rout in crude oil and commodity prices during the last quarter of the year, triggered by fear of a global economic slowdown and higher interest rates.
Utilities were next with an absolute profit decline of US$ 2.3 billion, followed by materials and F&B companies with profit declines of US$ 1.4 billion and US$ 1.2 billion, respectively.
The energy sector reported the biggest absolute quarterly profits in the GCC, which reached US$ 33.6 billion, up 6.2 percent y-o-y but down 19.6 percent q-o-q. The q-o-q decline came after average crude oil prices declined by 11.9 percent q-o-q during Q4-2022 to reach US$ 88.53/b (Brent crude spot prices). Net profits for 11 out of the 22 companies in the sector declined q-o-q during Q4-2022 with Aramco’s profit declining by almost 20 percent.
Banking sector
Profitability for the GCC banking sector breached pre-pandemic levels and reached another record level in 2022. Aggregate profits during 2022 increased by 24.6 percent to reach US$ 44.4 billion.
The y-o-y increase in 2022 was broad-based across the region, with double-digit growth in profits for most markets in the GCC.
Saudi-listed banks reported the biggest absolute increase in profits during the year by US$ 3.7 billion or 28.1 percent to reach US$ 16.7 billion, the highest in the GCC.
The growth in profits during the year was led by an increase in total bank revenue as well as a decline in loan loss provisions. Total bank revenue increased by a strong 16.4 percent to reach US$ 104.8 billion during 2022, the highest on record mainly led by an increase in both net interest income as well as non-interest income.
Revenue growth was broad-based across the GCC with all the country aggregates seeing double-digit growth. Saudi-listed banks once again reported the biggest increase in revenue with a growth of 18.4 percent or US$ 5.5 billion to reach US$ 35.4 billion.