After several years of stabilizing asset quality declining credit losses and improving returns banks in the Gulf are navigating rougher waters Standard & Poor’s said in a report.
Global oil prices have plummeted since June 2014 and Standard & Poor’s expects them to remain relatively weak through 2016.
This means given the importance of oil-related revenues in the region’s economy a gradual weakening in economic conditions for the sovereigns of Bahrain Kuwait Oman Qatar Saudi Arabia and the United Arab Emirates (UAE) which comprise the Gulf Cooperation Council (GCC).
In early February S&P changed the outlook on the ratings on Saudi Arabia to negative from stable. That was followed by revisions to the outlooks on Al-Rajhi Bank the National Commercial Bank Riyad Bank and Samba Financial Group to negative from stable on Feb. 18.
Commenting on the S&P report Ihsan Bu Hulaiga a financial analyst told Arab News: ‘There is no comparison between Saudi banks and their counterparts in other Gulf countries.’
He said: ‘The Saudi market is large but the number of local banks is small. However the market is stable recording a high rate of growth.”
Bu Hulaiga said the horizon of Saudi banks is positive because of high government spending on infrastructure projects.
Talat Hafiz secretary general of the Media and Banking Awareness Committee of Saudi Banks said: ‘Saudi banks are growing despite the sharp drop in oil prices by more than 40 percent since July 2014. However the low oil prices have not reflected on Saudi banks’ performance. Saudi banks still have financial abilities to expand their activities in the private sector.’
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