Fitch Ratings-Dubai: The impact of the pandemic on Saudi Arabian banks has been contained, while pressures on the operating environment have eased and the economic activity is gradually recovering, supported by higher oil prices, Fitch Ratings says in a new report.
Deterioration in asset quality and profitability was limited and the banks’ financial metrics have stabilised. These have been underpinned by government support measures that included interest-free deposits, but also by the strong loan growth in 2020 and 1H21 (14.9% and 19.0%, respectively) which was boosted by the sustained momentum in retail mortgages. Delayed recognition of impairments remains a key risk but we believe the impact on the sector’s asset quality and overall financial profiles will be contained.
Fitch revised the Outlooks on all Saudi banks’ Long-Term Issuer Default Ratings to Stable in 2Q21 and 3Q21 to reflect reduced pressures on the operating environment and the Stable Outlook on the sovereign rating. Saudi banks' weighted average Viability Rating of ‘bbb+’ remains the highest in the Gulf Cooperation Council.
Pressures on the operating environment from the pandemic and lower oil prices are easing, helped by recovering global oil demand and increasing non-oil economic activity. Some sectors remain under pressure and the operating environment has not fully recovered but we believe the downside risk for banks has reduced.
The report, ‘Saudi Arabian Banks – Peer Review’, is available at www.fitchratings.com
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Media Relations:
Louisa Williams
London
Tel: +44 20 3530 2452
Email: louisa.williams@thefitchgroup.com
Additional information is available on www.fitchratings.com
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