Aggregate earnings of Gulf Cooperation Council (GCC) companies declined for the second year in row on correction in real estate prices and higher credit provisioning by banks, says a research report.
According to a Kuwait Financial Centre (Markaz) report, with 67 per cent of companies declaring results so far, aggregate results show a decline of 5 per cent for GCC as a whole for 2009 versus an 18 per cent expansion in the MSCI Emerging Markets Index EPS.
The S&P 500 EPS witnessed a nine per cent contraction. The visibility of Kuwait remained poor with only 20 per cent of companies reporting their full year earnings so far.
Fourth quarter earnings plummeted due to a correction in real estate prices in Qatar, UAE and Kuwait, the report said.
Furthermore, the debt crisis in Dubai led to greater provisioning by banks against credit losses and impairment in the value of investments. It had an adverse impact on bank earnings during the fourth quarter of 2009.
On a year-on-year (YoY) basis, earnings of the financial services and real estate sector suffered the most, down 67 per cent and 64 per cent, respectively in 2009. GCC banks' earnings declined by 1 per cent yoy in 2009 primarily due to dip in earnings in the last quarter.
Meanwhile, conglomerates posted a profit of $971 million in 2009. They had registered a loss of $8 billion in 2008. The telecom sector registered a 7 per cent yoy decline in earnings in 2009.
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Meanwhile, Saudi Arabia registered a YoY growth of 26 per cent in its earnings and UAE’s corporate earnings declined by 32 per cent due to Dubai’s debt woes, the report said.
The banking sector, which contributed 45 per cent of the overall corporate earnings, witnessed a YoY decline of 19 per cent in 2009. The real estate sector's gains dipped by 86 per cent on a YoY basis.
On a like-to-like basis (29 companies), Kuwait registered an earnings growth of 29 per cent in 2009. Kuwaiti banks and financial services sector emerged out of the crisis and registered aggregate profits in 2009.
The rise in Ezdan Real Estate Company’s Q4 profits ($2.3 billion) aided Qatar to record a 14 per cent growth in earnings in 2009. On a YoY growth basis, Bahrain was the worst performer for the year 2009 in the GCC region, this is particularly due to steep losses ($728 million in 2009) reported by Gulf Finance House.
Oman’s real estate sector reported an earnings growth of 22 per cent YoY in 2009. However, the country's overall earnings saw a 14 per cent decline, driven by fall in gains of banking (19 per cent) and conglomerates sectors (28 per cent).