Bank lending in the UAE, Saudi Arabia and in most countries in the Middle East is expected to increase next year on the back of strong economic conditions, according to Fitch Ratings.

Lenders in the region are also likely to post positive earnings in the coming year despite expected lower interest rates.

The ratings agency also expects the same positive trend in banks’ asset quality and liquidity.

"Banks will maintain generally sound profitability despite expected lower interest rates, and stable asset quality, healthy liquidity and adequate capital buffers for their risk profiles," the ratings agency said.

Most banks in the region have a low to moderate risk of default. Two-thirds of lenders reviewed by Fitch have a high credit quality score or investment-grade Issuer Default Ratings (IDRs).

The banks’ safety scores are largely thanks in part to perceived sovereign support. The lenders’ standalone creditworthiness is also a significant factor.

(Writing by Cleofe Maceda; editing by Seban Scaria) seban.scaria@lseg.com