Fitch Ratings-London: Fitch Ratings’ neutral 2023 sector outlook for Middle East (ME) banks reflects solid economic conditions, rising interest rates and high oil prices. Credit growth will remain soft and below pre-pandemic levels in most countries except Saudi Arabia. Fitch expects improved profitability and solid liquidity to continue, while capital buffers should remain adequate for the risks. Fitch expects asset quality to remain stable.
Two-thirds of the Issuer Default Ratings (IDRs) assigned by Fitch to banks in the ME are investment grade, and these are mainly driven by potential sovereign support (61% of total IDRs); that leaves 36% of IDRs driven by the banks’ standalone creditworthiness, as shown by their Viability Ratings, and 3% driven by potential shareholder support. The large distribution of IDRs, from ‘AA-’ to ‘CCC+’ (the lowest being mainly in Iraq), mostly reflects the wide sovereign rating distribution.
The Positive Outlooks on most Saudi banks’ IDRs reflect that on the sovereign, in turn driven by improvements in its balance sheet given higher oil revenue and fiscal consolidation. The Negative Outlooks on Egyptian banks’ IDRs also mirror that on the sovereign, reflecting deterioration in the country’s external liquidity position and reduced prospects for bond market access, which leaves the country vulnerable to adverse global conditions at a time of high current account deficits and external debt maturities.
-Ends-
The report, ‘Middle East Banks Outlook 2023’, is available at www.fitchratings.com.
Contact:
Media Relations: Peter Fitzpatrick, London
Email: peter.fitzpatrick@thefitchgroup.com
Additional information is available on www.fitchratings.com
