S&P Global: Gulf banks able to absorb growth slowdown and weak profitability due to war

S&P Global: Gulf banks able to absorb growth slowdown and weak profitability due to war

S&P Global Ratings said that Gulf banks are able to absorb the slowdown in growth, weak profitability, and decline in asset quality indicators as a result of the war in the Middle East.

The agency added in a report that what will help Gulf banks in this is their strong capital buffers, the cyclical decline in non-performing loans, the current provisioning margins, in addition to limited exposure to directly affected sectors and regulatory easing measures.

It pointed out that in the event of a major escalation of the war, there could be a significant slowdown in economic activity and investor sentiment, leading to greater negative repercussions on Gulf banks. However, banks are expected to be able to withstand a significant level of stress that could take the form of capital flight or a sharp deterioration in asset quality.

It said that almost all of its outlooks for the credit ratings of Gulf banks are stable, and the only bank with a negative outlook had that outlook before the war.

Regarding Saudi Arabia, the agency clarified that the war affects Saudi Arabia to a lesser extent than other Gulf countries, thanks to the East-West oil pipeline (which allows exports from the port of Yanbu), as well as the presence of a large domestic market.

It added that at the same time, the Saudi economy is dealing with a reassessment of its megaprojects, as investments shift towards finding new export routes for oil and petrochemicals, in addition to investments in security. Mortgage growth is likely to remain limited due to continued high interest rates and weak economic sentiment.

The war on Iran

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