Saudi banks resilient despite decline in profitability: S&P Global

Riyadh city

Saudi banks showed some resilience owing to the support from the Saudi Central Bank (SAMA) and minimal reliance on external funding, S&P Global Ratings said in a recent report.

According to “Banks In Emerging Markets: 15 Countries, Three Main Risks (January 2021 Update)”, S&P expects the financial performance of Saudi banks to remain under pressure this year on the back of lower interest rates and higher cost of risk.

Banking systems in emerging markets like Saudi Arabia will face three common risks this year. They include expected deterioration in asset quality indicators as regulatory forbearance measures are lifted; a volatile geopolitical environment or domestic policy uncertainty; and - for a few - vulnerability to abrupt movements in capital flows.

However, given the exceptionally low interest rates in several developed markets, the ratings agency expects Saudi banks with sound credit fundamentals to retain good access to international capital markets.

“In the GCC, 2021 started positively with the resolution of the boycott of Qatar by four Arab countries. In view, this will improve political and economic cooperation across the GCC,” the report noted.