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Revealed: Impact of Covid-19 on GCC retail banks revenues

Revealed: Impact of Covid-19 on GCC retail banks revenues

BCG says earnings could shrink by -2.1% annually between 2019 and 2024

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GCC retail banks revenue pool could shrink by -2.1 per cent annually between 2019 and 2024, according to a new report by Boston Consulting Group (BCG).

BCG’s new report, a new report titled Global Retail Banking 2021: The Front-to-Back Digital Retail Bank shows the projected revenue outlook of retail banks in the UAE, Saudi Arabia and Kuwait in three retail banking revenue growth scenarios.

In a quick-rebound scenario, revenues will grow from $26.4bn in 2019 to an estimated $28.6bn in 2024, a CAGR of 1.6 per cent. In a 2019 to 2024 slow-recovery scenario, revenues are expected to shrink by a CAGR of – 0.1 per cent to $26.3bn.

The deeper-impact scenario will see the revenue pool shrinking by a CAGR of -2.1 per cent, underscoring the pressure caused by Covid-19 on banks’ bottom line.

Read: How Open Banking can foster innovation in the financial landscape

Findings from the report indicate that the most affected retail banking products in regional banks because of the pandemic are consumer loans and deposit revenues. While loans (mortgages and consumer loans) and deposits accounted for 80 per cent of retail banking revenues in 2019, recent events highlight that payment, mortgage, and investment products are now likely to be the main sources driving retail banking revenue growth.

The acceleration of digital payments and e-commerce adoption in the GCC will be a factor to contribute and benefit the revenue growth, the report adds.

“The pandemic has taken a toll on the retail banking sector, and we believe that a slow-recovery scenario is most likely to occur for GCC retail banks,” said Godfrey Sullivan, managing director and Partner, BCG. “In this scenario, the revenue pool of regional retail banks will approximately reach the 2019 level only by 2024, essentially a flat market.”

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