Thursday, 2 December 2021

Al Rajhi Bank’s $2.8 billion profit almost quarter of the 100 largest Islamic banks’ total

5 min read

By Wendy Weng

Saudi Arabia-based Al Rajhi Bank retained its position as the largest and strongest Islamic bank in the world, with total assets amounting to $125 billion in 2020. The aggregate total assets of the 100 largest Islamic banks in the world grew by 12% in 2020, while the aggregate net profit of these banks contracted by 15%.

  • The top 10 banks maintained almost the same ranking in the list of largest Islamic banks
  • Saudi Arabian and Qatari Islamic banks demonstrated stronger balance sheets than peer banks in other countries
  • Meezan Bank, Bank Islam Malaysia and Maybank Islamic are the top three strongest Islamic banks in Asia

Saudi Arabia-based Al Rajhi Bank topped the ranking of the largest Islamic banks in the world, with total assets up by 22% to $125 billion in 2020. It generated $2.8 billion in net profit in 2020, which accounted for 26% of the total net profit of the 100 Islamic banks.

Al Rajhi Bank remained on top of the ranking of the strongest Islamic banks based on a detailed and transparent scorecard that evaluates Islamic banks on six areas of balance sheet financial performance, namely the ability to scale, balance sheet growth, risk profile, profitability, asset quality and liquidity.

The 100 largest Islamic banks in the world expanded their net loans and customer deposits by 15.1% and 15% respectively in 2020, according to the evaluation of the 100 largest Islamic banks and financial holding companies (banks) in the world. This year’s evaluation covers banks from 25 countries and ranks them according to asset size and overall strength.

Saudi Arabian Islamic banks held the largest net profit

The top 10 banks’ ranking of the largest Islamic banks remained almost the same, with the exception of CIMB Islamic Bank, which moved up one notch to ninth spot, while Al Baraka Banking Group dropped to tenth place. Dubai Islamic Bank and Kuwait Finance House maintained their second and third places, respectively. In fourth place is Maybank Islamic which remained the largest Islamic bank in Asia.

The 100 largest Islamic banks combined had $1.11 trillion in total assets, $721 billion in net loans, $824 billion in customer deposits and $12.7 billion in net profit. The aggregate total assets of these banks increased by 12%, while aggregate net profit slid by 15%.

Malaysia had the most Islamic banks on the list, followed by Indonesia, Bahrain and Bangladesh. Malaysia also held the largest share of total assets at 21.8%, while Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Qatar accounted for 19.5%, 14.1%, 11.4% and 11% of the aggregate total assets respectively. Saudi Arabia had the notably greater share of net profit, at 34.3%, followed by Qatar (16.4%), the UAE (12%) and Malaysia (11.8%).

Saudi Arabian and Qatari Islamic banks remained strong

Saudi Aabian and Qatari Islamic banks attained the highest average strength score of 3.91 and 3.62 out of 5 respectively. Kuwaiti and Turkish banks achieved higher average strength score than that recorded by all the 100 Islamic banks, at 3.27 out of 5. The average return on asset (ROA) of Saudi Arabian and Qatari Islamic banks reached 1.91% and 1.52% respectively, compared with the global average of 1.05%. Saudi Arabian Islamic banks remained well capitalised, maintaining a 19.5% average capital adequacy ratio (CAR), while the average gross non-performing loan (NPL) ratio and loan loss reserves (LLRs) to gross NPLs ratio stood at 1.3% and 251%, respectively.              

The top 10 Strongest Islamic Banks comprise three Saudi Arabian banks, three Qatari banks, two Turkish banks and one each from Kuwait and Pakistan. Al Rajhi Bank performed strongly in most indicators and registered a 22% growth in assets. Qatar Islamic Bank placed second, with a 1.8% ROA and a 20.1% cost to income ratio. It maintained a CAR of 19.4% and its asset quality also remained relatively sound. However, its liquid assets to total deposits and borrowings ratio was at a low level of 12.7%. Dubai Islamic Bank, the second largest Islamic bank in the world, ranked eleventh in the ranking of the Strongest Islamic Banks. 

Meezan Bank is the strongest Islamic bank in Asia

Out of the 100 Islamic banks, 42 are from Asia. These banks held 29% of the aggregate total assets of the 100 largest Islamic banks, but only generated 16% of the aggregate net profit. Meezan Bank, Bank Islam Malaysia (BIMB) and Maybank Islamic are the top three strongest Islamic banks in Asia.

The three banks maintained strong levels of capitalisation as evidenced by the CAR of above 18%. Meezan Bank excelled in profitability and liquidity, while BIMB and Maybank Islamic showed better performance in asset quality. The ROA of Meezan Bank improved from 1.6% in 2019 to 1.8% in 2020, and its liquid assets to total deposits and borrowings ratio was higher at 67% in 2020. Maybank Islamic saw its ROA weaken to 0.6% from 1.08%, and BIMB’s ROA was also reduced from 0.97% to 0.82%. However, the gross NPL ratio of Meezan Bank deteriorated to 2.8% in 2020 from 1.8% in the year earlier. Both BIMB and Maybank Islamic witnessed improvement in asset quality. The gross NPL ratio of BIMB was down from 0.86% to 0.67%, while the gross NPL ratio of Maybank Islamic improved from 1.62% to 1.19%.

In Asia, Bank BRI Syariah, Bank BNI Syariah and Bank Syariah Mandiri have merged to form Bank Syariah Indonesia in February 2021. Its total assets stood at $17 billion at the end of June 2021, which was lower compared with Maybank Islamic’s $66 billion. More mergers and acquisitions are expected to take place. For instance, the merger between Qatar-based Masraf Al Rayan and Al Khalij Commercial Bank has been approved by the Qatar Financial Markets Authority in June 2021. Overall, the Islamic banking industry continues to grow amid the pandemic-related disruptions.

Click here to see the 2021 Largest Islamic Banks Ranking

Click here to see the 2021 Strongest Islamic Banks Ranking



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