Riyadh – Mubasher: The outlook for Saudi banks is stable as the oil-rich nation’s economy is forecast to resume growth in 2018 on the back of higher public spending and other catalysts, Moody’s Investors Services said in a report on Wednesday.
The credit ratings agency projects the kingdom's economy to rise by 1.3% this year, after contracting by 0.7 percent a year earlier. This in return will boost lending growth – backed by corporate and real estate lending – which is expected to hike by 4% this year.
"Recovering oil prices, record budget expenditure and government efforts to protect households from the impact of economic reforms will be the main drivers of credit demand in 2018 and 2019," Moody's vice-president and senior credit officer Olivier Panis said.
Lending to corporates will turn a corner gradually, especially in the construction, manufacturing and transport sectors, he added, noting that retail lending will remain buttressed by solid growth in mortgages.
Saudi banks’ profitability remained the highest among the GCC peers, according to the report.
Moody's expected that profit margins of the Saudi lenders will rise, in line with a growth in interest ratio, credit, fees’ income, and a decrease in operating costs.
“Stable profitability and moderate loan growth will reinforce banks' already strong capital adequacy. Moody's expects an average tangible common equity (TCE) ratio of around 17.8 percent by the end of 2019, up from 16.8 percent in September 2017,” the report founded.
