Doha: Geopolitics and oil are key for GCC banks for 2019-2020. The GCC banks’ financial profiles should remain stable for the remainder of these years, absent any unexpected geopolitical shock or significant drop in oil prices, S&P’s Midyear 2019 banking outlook noted.
The banks’ lending growth should stabilise at 4 percent-6 percent as public investments support growth. Returns on assets and net interest margins are to benefit from stable interest rates and significant noninterest-bearing deposits.
Stage 2 loans in some GCC countries reveal a few challenges given the stress on the respective economies. S&P expects problematic loans (Stage 2 and Stage 3) to remain stable at about 15 percent of total loans over the next 12-24 months.
S&P’s Midyear 2019 Global Banking Outlook said credit conditions remain supportive for global banks even if trade and geopolitical tensions are undermining confidence and economic momentum.
The Fed’s and ECB’s responses to counter the slowdown are positive for banks’ funding conditions but continue to call into question their business models given that interest margins will remain low for longer.
The pressure on profitability is higher in Europe and Japan. The vast majority of outlooks on banks is stable globally.
The bias has become less positive in Europe. Credit losses have likely bottomed out in many countries, while capitalization is unlikely to improve further. The steady push to make systemic banks resolvable continues, through a variety of approaches across the world. Technology is disrupting retail banking across the globe. Banks’ ability to respond will depend on their digital readiness.
