GCC banks should maintain stable financial profiles in 2020, says S&P

GCC banks should maintain stable financial profiles in 2020, says S&P

Barring any major increase in geopolitical risk, or a sharp fall in oil prices, banks across the Gulf Cooperation Council (GCC) should maintain stable credit fundamentals into 2020, said credit ratings agency S&P Global Ratings.

“In our view, GCC banks will successfully navigate a less-than-favorable macroeconomic environment in 2020 supported by their solid financial profiles,” the agency said in a statement.

S&P continued that it expects GCC economies to show modestly stronger economic growth in 2020, following a slowdown in 2019, due mainly to the September 14 attacks on Aramco’s oil facilities in Saudi Arabia.

The risk of further attacks cannot be completely excluded, S&P added.

Growth is also constrained by a broader global economic slowdown, and will remain below that results produced during the era of triple-digit oil prices.

“We therefore expect net lending expansion to remain flat, in the mid-single digits on average,” said S&P.

The profitability of GCC banks is expected to deteriorate slightly or, at best, stabilize.

Although profits will likely be negatively affected by a global shift towards lower interest rates for long, GCC banking core businesses (retail and corporates) will remain protected from fintech disruption, S&P added.

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