GCC corporate earnings decline 5% in 2009: Report

Aggregate earnings of Gulf Cooperation Council (GCC) companies declined for the second year in row on correction in real estate prices and higher credit provisioning by banks, says a research report.

According to a Kuwait Financial Centre (Markaz) report, with 67 per cent of companies declaring results so far, aggregate results show a decline of 5 per cent for GCC as a whole for 2009 versus an 18 per cent expansion in the MSCI Emerging Markets Index EPS.

The S&P 500 EPS witnessed a nine per cent contraction. The visibility of Kuwait remained poor with only 20 per cent of companies reporting their full year earnings so far.

Fourth quarter earnings plummeted due to a correction in real estate prices in Qatar, UAE and Kuwait, the report said. Furthermore, the debt crisis in Dubai led to greater provisioning by banks against credit losses and impairment in the value of investments. It had an adverse impact on bank earnings during the fourth quarter of 2009.

On a year-on-year (YoY) basis, earnings of the financial services and real estate sector suffered the most, down 67 per cent and 64 per cent, respectively in 2009. GCC banks’ earnings declined by 1 per cent YoY in 2009 primarily due to dip in earnings in the last quarter.

Meanwhile, conglomerates posted a profit of $971 million in 2009. They had registered a loss of $8 billion in 2008. The telecom sector registered a 7 per cent YoY decline in earnings in 2009.