LONDON: Banks in the Gulf are expected to see their financial position stabilize this year as they reap the benefits of some regional economic improvement, according a report from the ratings agency S&P Global.
“2018 will mark the stabilization of the financial profiles and performance of GCC banks, after two years of significant pressure,” the report said.
Most of the banks in the region rated by the agency have a “stable” outlook, with the exception of Qatari institutions which have “negative” outlooks due to the continued uncertainty surrounding the boycott on the country imposed by a Saudi Arabia-led coalition of Arab states.
Lending growth in the Gulf banking sector is forecast to remain “muted” in 2018, according to S&P Global. Private-sector lending rose by an annualized 2.6 percent in the first nine months of 2017, which compares to 5.7 percent in 2016, the report said.
Strategic initiatives such as Dubai Expo 2020 and the Saudi Vision 2030 are expected to push up private-sector lending growth to around 3-4 percent between 2018 and 2019, the agency said.
Non-performing loan (NPL) ratios are forecast to continue to deteriorate in the first six months of the year before eventually stabilising, S&P said.
At the end of September 2017, NPL to total loans ratio for the region’s banks reached 3.1 percent compared to 2.9 percent recorded at the end of 2016.
Declining real estate prices in the UAE could reduce asset quality of Emirati banks, though the deterioration is likely to be “contained.”
Funding is improving in the region, with government deposits in the banking sector growing, particularly in the UAE and Saudi Arabia. In contrast, deposit growth is under pressure in Kuwait due to increased government spending.
The agency said Gulf banks’ funding profiles were “satisfactory,” with core customer deposits dominating funding, while the use of wholesale funding remains limited.
While there were some improvements in banks’ profits in the first nine months of 2017, S&P Global does not see this trend lasting.
It predicted that bank profitability will “plateau” this year, due in part to muted lending and reduced risk appetite.
The introduction of new regulations such as IFRS 9 will push up the cost of risk for banks, putting some off taking on more lucrative but higher risk exposures.
GCC banking sector to stabilize in 2018, says S&P Global
GCC banking sector to stabilize in 2018, says S&P Global
Closing Bell: Saudi main index closes in red at 10,709
RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Thursday, losing 138.89 points, or 1.28 percent, to close at 10,709.04.
The total trading turnover of the benchmark index was SR6.59 billion ($1.75 billion), as 102 of the listed stocks advanced, while 154 retreated.
The MSCI Tadawul Index decreased, down 22.40 points or 1.52 percent, to close at 1,450.58.
The Kingdom’s parallel market Nomu lost 123.85 points, or 0.54 percent, to close at 22,792.98. This came as 30 of the listed stocks advanced, while 40 retreated.
The best-performing stock was Al-Rajhi Co. for Cooperative Insurance with its share price surging by 9.96 percent to SR74.50.
Other top performers included Jazan Development and Investment Co., which saw its share price rise by 9.89 percent to SR8.33, and Gulf Insurance Group, which saw a 7.48 percent increase to SR23.
On the downside, City Cement Co. and Al Gassim Investment Holding Co. saw declines, with their shares dropping by 5.51 percent and 4.22 percent to SR11.50 and SR13.15, respectively.
On the announcement front, Almoosa Health Co. has signed a construction contract with Almajal Alarabi Group valued at SR608.85 million to complete the electrical, mechanical, and architectural finishing works for the new Almoosa Specialized Hospital in AlHofuf City.
The agreement, finalized on Feb. 26, covers all complementary internal and external works based on approved engineering designs to ensure the facility is fully operationally ready upon completion.
According to a Tadawul statement, work on the project will commence immediately, with an expected completion timeline of 16 months.
Almoosa Health intends to finance the development through a combination of its own resources and long-term Shariah-compliant facilities secured from local banks, with the financial impact anticipated to begin following the hospital’s completion and commissioning.
Almoosa’s share price surged by 4.24 percent to reach SR147.50.
