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03 February 2020

Saudi banks to maintain stable financial risk profiles in 2020

Saudi banks’ growth prospects will remain linked to commodity prices and are susceptible to adverse changes in global economic conditions

In September 2019, the average long-term rating on banks in Saudi Arabia stood at ‘BBB+’/Bloomberg

by Kudakwashe Muzoriwa

S&P Global said that Saudi banks should maintain stable financial risk profiles in 2020, however, growth remains dependent on the dynamics of the oil market and is vulnerable to global economic and regional geopolitical trends.

In a report, Banks In Emerging Markets: 15 Countries, Three Main Risks, S&P Global highlighted that the lending growth in the Kingdom will be mortgage-led and expects credit losses to stabilise in 2020 at about 70 bps.

The rating agency expects credit losses to stabilise, aided by the steadying economy and mortgage-led lending growth.

S&P expects the recovery of investment programmes and a pick-up in GDP growth to stabilise the cost of risk for Saudi banks in 2020 at about 70 bps.

Similarly, on the regulatory front, S&P lauded the Saudi Arabian Monetary Authority for a good track record, however, the regulator relaxed some regulatory requirements related to mortgage lending in 2019 due to government objectives to increase home ownership.

In September 2019, the average long-term rating on banks in Saudi Arabia stood at ‘BBB+’, in line with the outlooks on the banks, which were stable, said S&P.

Additionally, the average stand-alone credit profile was ‘bbb+’, one notch higher than the anchor level for a bank operating in the country, owing to the strong capitalisation of Saudi banks.

RELATED STORIES: S&P Global Saudi Arabian Monetary Authority Saudi banks





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