The outlook for GCC banks remains stable, underpinned by solid economic growth, and by the banks’ strong capital buffers and substantial liquidity, Moody’s Investors Service said yesterday.
“Government spending programs will push average non-hydrocarbon GDP growth to 2.6 percent in 2020, providing favourable operating conditions for the region’s banks,” said Nitish Bhojnagarwala, VP-Senior Credit Officer at Moody’s. “Declining interest rates will start to pressure banks’ net interest margins but margins will remain strong compared with global peers.”
Loan performance will weaken modestly but will remain solid. New problem loans will form primarily in the slowing construction and real-estate sector. Moody’s expects non-performing loans to stand at a moderate 3.5 percent of total loans by the end of 2020, from an estimated 3.3 percent in 2019. Capital is a considerable source of strength for GCC banks and it will remain stable at a high level.
