GoDubai
  
  
  
  
Citylife > Press Release
  Home Contact us Add to Favourites
Most Recent Postings
More Press Releses
Featured Sections

Event Finder
A daily roundup of exhibitions, promotions and other events in Dubai and the rest of the Emirates.
Submit an Event
Latest Dubai Press Releases >>

 
  Share
  • GCC banks' financial profiles should remain stable in 2019, absent any unexpected geopolitical or oil-price shock.
  • Bank lending growth should stabilize at around the 5% mark over the next 12 months, as higher oil prices and stronger public investments raise economic growth in the region overall.
  • We expect profitability to stabilize--with return on assets at about 1.5%-1.7% and net interest margins at 3% on average in 2018--benefitting from the higher interest rates and significant non-interest-bearing deposits on banks' balance sheets.
  • International operations could pose a latent risk for some GCC banks. A few banks with exposure to Turkey will see some impact on their asset quality.
  • Three-quarters of the 24 GCC banks we rate carry a stable outlook. Negative outlooks are concentrated in Qatar and on a few banks in other GCC countries due to higher risk in their international operations. The average GCC bank rating is 'BBB+'.
Dubai, UAE, October 01, 2018:  Banks in the Gulf Cooperation Council (GCC) should continue to breathe a little easier in the year ahead. Barring any major increase in geopolitical risk or a sharp fall in oil prices--not our base case scenario--2019 should mark a stabilization of GCC banks' financial profiles, following three years of significant pressure. What's more, with the transition to IFRS 9, GCC banks have now recognized most of the impact of the softer economic cycle on their asset quality. We therefore believe that the amount of problematic assets, which we define as IFRS 9 Stage 2 and 3 loans, will likely remain stable, but do not exclude transition between the two categories. The situation in Qatar will continue to depend on how the boycott on the country by its GCC neighbors evolves. We expect GCC economies to show stronger economic growth in 2019 of about 2.8% (unweighted average of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman). However, this growth will still be below the triple-digit oil-price eragrowth of 2011-2013. 
 
We therefore expect lending growth to remain at around the mid-single digits. At the same time, we think that cost of risk will stabilize at around 1.0%-1.5% of total loans. Thanks to IFRS 9, the buffer of  provisions that GCC banks accumulated over the past years is now stronger. The new reporting standard, adopted from the start of this year, required banks to set aside provisions in advance, based on their loss expectations. Finally, we think that GCC banks' profitability will stabilize. It will benefit from the higher interest rates and the significant amount of non-interest-bearing deposits sitting on banks' balance sheets.
 
Supporting the ratings, banks in the GCC continue to display strong capitalization by global standards, albeit with signs of qualitative deterioration. Over the past year, we have affirmed ratings on most of the 24 banks we rate in the GCC. We have taken a few negative rating actions, most of them on banks in Bahrain and Qatar. We upgraded one bank in the UAE based on our view of its higher systemic importance and higher expected government support. Overall, 25% of our rated banks in the GCC currently have a negative outlook, two-thirds of which are in Qatar, due to the potential effect of the boycott on Qatari banks' funding profiles, asset quality, and profitability. There are also a couple of other banks elsewhere in the GCC, where higher risks from their international operations drive our negative outlook.
 
Lending Growth Is Recovering Slightly
 
Higher oil prices and stronger public investments are resulting in higher economic growth across the GCC in 2018. We forecast that oil prices will stabilize at about $65 per barrel in 2019 and $60 in 2020, and we anticipate unweighted average economic growth of 2.8% in 2019-2020 for the six GCC countries. This is less than a half of what they delivered in 2012, but more than five times higher than their performance in 2017.
 
Growth in lending recovered slightly, reaching an annualized 4.7% at midyear 2018. We expect a slight acceleration in the next two years barring any unexpected shock. Higher government spending, supported by strategic government initiatives, will support the lending growth. Nevertheless, a surge in geopolitical risk or a significant drop in oil prices, and ensuing delays of some of these initiatives and in overall consumer confidence, could severely affect our base-case scenario.



Posted by : GoDubai Editorial Team
Viewed 4307 times
Posted on : Monday, October 1, 2018  
Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of GoDubai.com.
Previous Story : ADNOC and BHGE Form a Strategic Partnership to Improve Drilling Efficiencies and Grow ADNOC Drilling...
Next Story : WCU: Signs of life as dollar weakens and trade tensions ease
Email this article Print this article

Share this article with your friends and followers
NewsVine

Comments

Back to Top  
Most Viewed Press Release posted in the last 7 days
BodyO launches officially its AiPod for a full body check-up during the Gitex Fu...
The World of Aigner Wunderkammer
Halloween “Catwoman” mask using BROW products
Fifi & Friends - Now available at more outlets across the UAE
Win up to 250,000 Gold coins at Malabar Gold & Diamonds this festive season
Corum Heritage Eleganza- Dedicated to the stylish woman
Michael Kors to Introduce a Special-edition Whitney Handbag for the Middle East
BOLLYWOOD PARKS™ Dubai introduces 11 new shows with a new line up of performance...
Hour Choice presents Coach Park Collection (Suede straps)
Dubai's newest social hub - Bar Baar introduces ‘Thela Baar Brunch'
Sunglasses Trends for Fall/Winter 2018
Scuderia Ferrari Aspire Watch Special Edition Gift Set
Dubai Shopping Festival Returns With Much-awaited Mega Raffles
Saddle Up With kate spade Fall 2018
Neymar Jr. Partners With GaGà Milano as Brand Ambassador
CITIZEN Unveils 100th Anniversary Limited Edition Collection
Rado DiaMaster Ceramos Automatic
Trust Corine de Farme for Sulfate-Free Baby Products
L'oréal Among the Top 10 of Thomson Reuters Diversity & Inclusion Index
W Motors and Safe City Group introduce the BEAST PATROL at GITEX: One of the mo...
Introducing the Nokia 7.1 to the UAE
Malabar Gold & Diamonds partners with NBF for the second NBF Fujairah Run
Be Thankful with Tub of Butter This Thanksgiving
Sharjah Government pavilion highlights digital transformation of Sharjah at GITE...
HUGO BOSS Watches Jump Collection
Tissot Bella Ora Round Style incarnate
8 Jours Grande Taille a modern take on a classic timepiece
Toyota's legendary King goes urban with the 2019 Land Cruiser Grand Touring Edition
Nissan to Make Official On-track Formula E Debut
Tazio Nuvolari – Time is legend
Western Digital powers AI-enabled storage for futuristic surveillance and security
Cell Phones, Sporting Goods, and Soon, Cars: Ford Innovates with “Miracle” Mater...
Lacoste Kyoto Collection
Rado HyperChrome Diamonds
Golden Bridge Titane Dlc: The Clash Of The Titans
Happy Anniversary – Celebrating 30 years of the Regulator!
Baroncelli Big Date collection from Mido
Dubai Festival City Run 2018 to take place on November 9th
Eberhard & Co. Presents Scafograf 100
Avivo's Ribbon of Life Walk in support of Breast Cancer on 19th October
Healthcare leaders sign in Dubai a Call for Action to raise awareness about ‘sil...
Epson Introduces the New A3 and A4 business inkjet aimed at busy workgroups duri...
Daikin eyes significant expansion of business in the UAE
Dubai Business Women Council witnesses 36.5% growth in total membership since th...
Synx, Pand.ai, and AIMLedge named winners of startAD's Artificial Intelligence V...
Jeddah Airport delegation applauds Dubai Customs' experience in facilitating tra...
Roger Dubuis opens a new boutique in Monaco
Motiongate Dubai's Fright Nights Offers Something for Everyone this Halloween
National Day Camel Marathon set to take place in February
#MyDubai Competition offers Expatriates the Chance to Win a Trip for their Frien...