Banks in the GCC states have seen their outlook turn from negative to stable as higher oil prices are helping economies to rebound, according to Moody’s.
The outlook for the banking systems of Saudi Arabia, Kuwait, the UAE, Qatar, Oman and Bahrain have seen operating conditions improve after the pandemic, as the jump in oil prices boosts economic activity, the rating agency said in a report.
Nitish Bhojnagarwala, VP-senior credit officer, said: “Non-oil activities including tourism will also contribute to the improvement in some areas.”
Saudi banks will see increasing profitability and accelerating credit growth from high oil prices, which will boost the economy, while banks in Oman and the UAE will maintain steady profitability and solid capital buffers, Moody’s said.
The ratings agency said Bahraini banks now have resilient funding, liquidity and capital positions after the coronavirus economic shock, with sustained economic rebound to restore banking profitability close to pre-pandemic levels within 12-18 months.
In Qatar, increased tourism around the FIFA World Cup will also support the economy, while Kuwait's non-oil economy will continue its recovery.
“We expect GDP growth in the non-oil sectors of four percent in 2022 and 2023 after five percent in 2021. Domestic loan quality will remain sound as businesses and households resume normal activities after the pandemic,” the report said.
(Writing by Imogen Lillywhite; editing by Seban Scaria)