The provisions, which Gulf banks started to increase rapidly in the wake of the global economic crisis, are however expected to decline slightly in 2010, Kuwait Financial Centre (Markaz) said in an economic report.
The 61 banks in the six-nation Gulf Co-operation Council (GCC) made provisions worth 6.41 billion dollars in the first three quarters of last year during which provisions continued to rise quarter-on-quarter. Provisions last year were a five-fold surge over the modest 1.8 billion dollars set aside in 2007, and which grew to as much as 6.68 billion dollars in 2008, the report said. "This was due to heightened provisions taken by many of the GCC's largest banks in order to withstand the possibility of defaults in their loans books," the report said.
In 2008, provisions to loans ration rose to 1.13 percent from an average of 0.58 percent between 2003-2007, it said. The ratio is estimated to have gone up to 1.52 percent in 2009, and is forecast to decline to 1.31 percent this year.
The largest provisions were made by Kuwait's Gulf Bank and Bahrain's Arab Banking Corp at one billion dollars each. Kuwait Finance House - the emirate's largest Islamic lender, followed with 700 million dollars and National Bank of Dubai with 500 million dollars.
The first nine months of last year, Saudi banks set aside 1.1 billion dollars of provisions, Kuwaiti banks 1.8 billion dollars while banks in the United Arab Emirates made 2.57 billion dollars due to their higher exposure to troubled Saudi groups Algosaibi and Saad.