Despite the continued challenging operating conditions, the outlook for the Saudi banking system is stable, reflecting its resilience and strong financial fundamentals, Moody's Investors Service said Monday. The stable outlook expresses Moody's expectations for the fundamental credit conditions in the Saudi banking system over the next 12 to 18 months.
The Saudi banking sector remains sound due to the government's fiscal stimulus, which has sustained macroeconomic growth, the banks' robust financial fundamentals, including strong liquidity and adequate profitability and capitalization, and a prudent regulatory environment, said Moody's in its annual Banking System Outlook on Saudi Arabia.
Catalysts for potentially greater lending activity could include banks' strong liquidity and expectations of a peak in provisioning levels in conjunction with banks' efforts to maintain market share and margins in the current low-interest/low-growth environment. Indications already point to a pick-up in loans to the private sector, with a healthy pipeline of projects expected over the next 18 months, which — coupled with banks' growing emphasis on retail banking — is conducive to stronger private sector growth.
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