Different Dynamic The second half of 2007 revealed that there was a different dynamic driving banks in the Middle Eastern region as these banks were barely affected by the beginning stages of the credit crunch. Banks in the GCC region appear to have enjoyed the benefits of the dynamic even more so. In late 2007 Arab Banks were still expanding and bringing in higher profits. In reviewing the Top 100 Arab Banks one can confirm that there is indeed something driving the success of Arab banks. Aggregate Tier 1 capital for the Top 100 Arab Banks in 2008 listing grew by 19.7%. While this growth rate is slower than the previous year’s rate of 30.3%, it is still higher than the average growth rate of 15.9%. The massive boom of Arab Banks has only recently started to show the effects of the credit crunch, however the effects on Arab banks are still minor compared to other regions. Boom Conditions The Arab region is still the world’s fastest growing banking region. Total assets moved up 27.3% in 2008. Additionally, aggregate pre-tax profits displayed a positive change of 6.9% in annual growth well above the average which has fallen to 0.7%. The six GCC states make up 59 of the Top 100 Arab Banks. These 59 banks account for 78.5% if the aggregate Tier 1 total and account for 77.7% of aggregate pre-tax total profits. In terms of aggregate pre-tax, Saudi Arabia holds the largest share (30.7%) of the percentage, followed by the UAE (19%), Kuwait (14.9%), Qatar (7.3%), Bahrain (3.6%), and Oman (2.2%). Emerging Trends Islamic Banking has increased tremendously in popularity in recent years, but mainly over the past year. Many banks in the Gulf, particularly in Saudi Arabia and in the retail sector, are increasing their scope of Sharia-compliant products. As a result of offering Islamic Banking products at retail and whole-sale levels, these banks are now managing to attract new markets. However, the growth of Islamic Banking is not isolated to the Arab banking region, it also being witnessed in London and Asia and is providing additional strength and stability to the Arab banking effort. Source: The Banker – November 2008