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4 Gulf Banks Raise Interest Rates by 0.25%, Qatar Holds

The city of Riyadh (Asharq Al-Awsat)
The city of Riyadh (Asharq Al-Awsat)
    Dubai -Asharq Al-Awsat
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4 Gulf Banks Raise Interest Rates by 0.25%, Qatar Holds

The city of Riyadh (Asharq Al-Awsat)
The city of Riyadh (Asharq Al-Awsat)

The majority of central banks in the Gulf region raised the main interest rates on Thursday, following a decision by the US Federal Reserve to raise its key policy rate by 0.25%, in an effort to counter inflation.

Qatar kept the interest rate unchanged, while the Saudi Central Bank (SAMA), the Central Bank of the UAE, the Central Bank of Oman and the Central Bank of Bahrain announced in separate statements they would raise their rates by 0.25%.

The Saudi Central Bank (SAMA) said it increased its key interest rates by 25 basis points, following the US Federal Reserve’s move. It added that it lifted its repurchase agreement (repo) and reverse repo rates by 25 bps to 5.25% and 4.75%, respectively.

Similarly, the UAE Central Bank raised its base rate for the overnight deposit facility (ODF) by a quarter of a percentage point to 4.65 percent, from 4.4 percent, effective from Thursday.

For its part, the Central Bank of Bahrain increased its key rate on one-week deposits by 25 bps to 5.5 percent, citing “development of the international financial market and… to ensure the smooth functioning of the money markets in the kingdom”.

On the other hand, the Qatar Central Bank (QCB) decided to keep the current interest rates unchanged, saying that it would maintain the repo rate at 5.25 per cent, the deposit rate at 5 percent and the lending rate at 5.5 percent.

“The Qatar Central Bank aims to keep current interest rates at appropriate levels to support economic growth,” the QCB said in a statement.

“The step-down in the magnitude of the rate hike is positive for the GCC, who have not required such an aggressive tightening cycle,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“We expect to see some greater impact of the rate hikes this year on credit demand, though the investment programs should provide some support for credit growth,” she added.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.