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 8900 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
Hackket's Bags of Style
Tissot Introduces Chrono XL 3x3 Street Basketball Special Collection
Introducing the Swim and Beachwear Summer Collection from Marks & Spencer
Saint Honore
Chloé Launches The New Cloud-shaped “rosie” Sunglasses
BYS COSMETICS Now in UAE
VBQ-presskit-denim-70s Capsule
New Land Rover Defender Completes Tusk Testing to Support Lion Conservation in Kenya
OMEGA Rocket Engine - Introducing the Master Chronometer Calibre 3861
Ministry of State for FNC Affairs Launches Forum Titled ‘Political Empowerment i...
Electricity Most Searched Fuel Energy Term Online in UAE
Natural and gentle haircare essentials for your little ones from Fifi & Friends'
From the Big Screen to Real Life: Tag Heuer Unveils New Monaco Limited Edition ...
Eberhard & Co. Alfa Romeo Limited Edition
Jaguar Land Rover & Bmw Group Announce Collaboration for Next Generation Electri...
Rado Captain Cook Automatic Limited Edition with travel case'
Britain's Greatest Test Driver, Norman Dewis Obe, Passes Away
Aston Martin Produces First Cars at St Athan
The Gucci Runway Makeup Looks for Cruise 2020
BMW Group and Jaguar Land Rover announce collaboration for next-generation elect...
Kickstart your summer workout with Ibn Battuta Mall's free indoor family Fun Run
Certina DS PH200M collection'
Vincitore Realty sells out 108 homes in the Dh375 million Benessere project in j...
Backseat battles: kids driving their parents to distraction – and danger on the ...
Sony World Photography Awards Reveals New Categories for 2020 and Latest Sony Gr...
The Chaumet Garden of Earthly Delights
UAE and Oman bodies sign MoU to jointly promote Internal Auditing
Choose the perfect fragrance this Father's Day with Rasasi
ZAAM Launches a spin on their iconic Polyhedron bag
Jaquet Droz Unveils Its 2019 Novelties at Dubai Mall
Jennifer Lopez in Ralph Lauren
The SS19 Exclusive Edit From Etoile “La Boutique''
Ferragramo Cuir
Happy Father's Day with Tonda 1950 Skeleton
Restoration by Parmigiani Fleurier
Empower launches summer campaign to reduce district cooling consumption for the ...
Dubai Cares supports 3-year teacher training program in Ghana to boost early chi...
Team Abu Dhabi award Cappellini new long-term contract
Celebrate Father's Day with Marks & Spencer
Hamilton present Ventura collection
Dp World, UAE Region's Strategic Solutions Boost the Automotive Sector
Eberhard & Co. Alfa Romeo Limited Edition'
Introducing the MK Beach Club Pieces
Sharjah Department of Statistics and Community Development Calls on Citizens to ...
Aston Martin Ready to Race in the Spirit of '59 as It Honours 60th Anniversary L...
Lukoil Marine Lubricants strengthens its collaboration with KOTC
La Grande Vie by Corum
Turkish Airlines added Strasbourg to the list of its destinations in France
AMD and Samsung Announce Strategic Partnership in Ultra Low Power, High Performa...
The Health & Hygiene Industry Rises in MBLM's 2019 Brand Intimacy Study and is t...