DUBAI — Lenders in the Gulf Arab region were much better capitalized than their Western counterparts, albeit the Euro zone crisis also weighs on the region, Ashok Aram, Chief Executive Officer (CEO) of Deutsche Bank for the Middle East and North Africa (MENA) said here Thursday. Speaking at the three-day annual Gulf Petrochemical and Chemical Association, which ran its 7th edition from Tuesday to Thursday, Aram said the largest banks of the six member states of the Gulf Co-operation Council (GCC) benefitted from a low cost income ratio of below 40 percent on average while their combined return on equity stood between an attractive 12 percent to 15 percent in 2012, as they cleaned up their balance sheets in the wake of the financial crisis and implemented conservative lending policy. However, the GCC financial sector is not immune against the impacts of the ongoing euro zone crisis. “The GCC financing market, albeit picking up, cannot reach its full potential due to the uncertainty of the Eurozone crises, the cost of U.S. dollar financing and the new regulations banks have to implement based on BASEL III,” said Aram. Under BASEL III, banks have to set aside more capital for higher-risk exposures. Nevertheless, Aram said he expects the GCC debt market to advance further in 2013. “Since 2011, borrowers took advantage of a significant tightening of the yield curve and they will continue to do so,” Aram said, adding that Deutsche Bank MENA observed a growing risk appetite from GCC industry project financing, especially in the petrochemical industry. — SG/Agencies
