The ratings agency said that 2019 should mark a stabilisation of Gulf Cooperation Council (GCC) banks’ financial profiles following three years of significant pressure.
S&P Global Ratings said that banks in the GCC should continue to breathe a little easier in the year ahead.
In its Industry Credit Outlook report, S&P, said that with the transition to IFRS 9, GCC banks have now recognised most of the impact of the softer economic cycle on their asset quality. Therefore, the number of problematic assets defined as IFRS 9 stage two and three loans is expected to remain stable, but without excluding transition between the two categories.
S&P expects GCC economies to show stronger economic growth in 2019 of about 2.8 per cent, however the growth will still be below the triple-digit oil-price era growth of 2011-2013.
Lending growth is expected to remain at around the mid-single digits, hence the cost of risk is expected to stabilise at around one to 1.5 per cent of total loans.
Additionally, the reported also stated that GCC banks’ profitability will benefit from the higher interest rates and the significant amount of non-interest-bearing deposits sitting on banks’ balance sheets, reported Saudi Gazette.