GCC Corporate Earnings fall by 8% in First half of 2016. Expected to fall by 4% in 2016

Blue chips fared relatively better, while earnings of mid-cap and small-cap companies took a beating in H1 2016, falling by 38% (YoY) and 22% (YoY), respectively. Earnings for large cap stocks (market cap > USD 3bn; 60 companies, 73% of all GCC market cap) declined by 5% in 1H16. For the full year of 2016, we estimate earnings to fall by 4%.

Saudi Arabia
Saudi Arabia witnessed a decline of 7% in net earnings in H1 2016, compared with the same period a year back. Earnings declined for all sectors except financial services. The highest decline in earnings were witnessed in the real estate (-50%) and conglomerate (-36%) sectors. We estimate full year earnings to fall by 6% in 2016, due to further fall in earnings in the commodities, banking and construction-related sectors, as growth is expected to be affected by depressed oil prices.

Kuwait
Kuwait witnessed a decline of 6% in net earnings in H1 2016, with commodities, real estate and financial services declining by 11%, 23% and 53% respectively. Banking and telecom sectors were the only exceptions in Kuwait as their earnings bucked the declining trend. For 2016 full year, Kuwaiti corporate earnings are expected to fall by 2%, due to moderate growth in banking and telecom sector.

UAE
Earnings for UAE companies witnessed a decrease of 8% in H1 2016 (YoY basis) owing to low oil prices, sluggish economy and poor performance of real estate companies. Real Estate sector as a whole declined by 4% during H1 2016 as real estate prices in the UAE were down owing to poor business sentiments and stagnant sales. We expect UAE corporate earnings to fall by 3%, as subdued credit growth is expected to take a toll on banking sector earnings in H2 2016 and on expectations of further earnings contraction in real estate sector.

Qatar
Qatar earnings fell by 11% in H1 2016.  Qatar’s net earnings growth was affected by the fall in real estate sector earnings which fell by close to 50%. Telecommunications and banking sectors witnessed an increase in earnings during H1 2016 at 35% and 3%, respectively. We expect full earnings to be flat for Qatar in 2016 due to continued thrust on infrastructure developments and relatively better credit growth expectations than its GCC peers.