speed growth, GCC banks then had to pass the test of the economic crisis and now must prepare for yet another growth wave. Back to pre-crisis level in terms of profitability, banks urgently need to enhance their capabilities and level of customer service, after several years of relatively low investments. Their challenge will be to do this in an environment where cost-to-income ratios remain under pressure and cost management is a priority. “While conditions differ from country to country and from bank to bank, we expect overall sustained growth. The key challenge for GCC banks will be balancing growth aspirations with increasing cost pressure. But, there are country specific opportunities for banks that can manage a fast expansion,” said Cyril Garbois, partner and head of A.T. Kearney's financial institutional practice Middle East. Overall profitability of banks has now returned to pre-crisis levels in all markets, in spite of an overall slightly increased cost-to-income ratio for GCC banks. The macro-economic environment remains favorable, despite the ongoing European crisis; growth opportunities exist in a number of geographies and sustained overall growth in GCC banking is expected. However, asset growth remained subdued last year, staying below pre-crisis levels in all markets and navigating this environment is as much about identifying opportunities as it is about managing increased cost pressure. “Country-specific opportunities exist, for example in the Kingdom of Saudi Arabia where comparatively low banking penetration provides ample opportunities for growth,” added Dr. Alexander von Pock, principal, A.T. Kearney. The year ahead looks promising for the GCC banking sector. To leverage opportunities, A.T. Kearney experts suggest banks invest in retail banking infrastructure and capabilities, address untapped opportunities in wholesale banking and redefine priorities for external growth and international expansion. To overcome increased pressure on costs the A.T. Kearney experts suggest banks continue efforts to optimize productivity across the entire bank, from front to back office, including branch networks. Branch networks for example frequently fall short of delivering anticipated results-often only differing in size rather than purpose. The ideal branch network has different branch models depending on customer needs, ranging from light, kiosk-style sales outlets focusing on retail mass customers, to full-service branches covering all customer segments. “Efficiency improvement can yield significant savings, for example a structured approach to sales effectiveness can have a bottom line impact of 15 to 20 percent,” Dr von Pock added. Balancing growth aspirations with increasing cost pressure is the key challenge for GCC banks in 2012 and winning banks will leverage specific growth opportunities while managing costs and improving productivity at the same time.
