Growth returns to #Saudi Arabian banks but remains fragile; buffers are sound: Fitch | ZAWYA MENA Edition

Growth returns to Saudi Arabian banks but remains fragile; buffers are sound: Fitch | ZAWYA MENA Edition:

Fitch Ratings-London-February 05: The soft operating environment and subdued GDP growth in Saudi Arabia are challenges to credit demand as the economy remains highly oil-dependent, despite the government's diversification efforts, Fitch Ratings says. The weak pipeline of government infrastructure projects, modest real GDP growth forecasts, still low consumer confidence, fiscal tightening and geo-political tensions remain threats to credit growth.

Nonetheless, banks' profitability has been resilient and remains a rating strength, underpinned by strong franchises, cheap funding and limited competition. Performance metrics improved in 2018 on the back of rate hikes by the Fed but this trend is likely to reverse.

Asset quality metrics continue to suffer from weak consumer confidence and low credit demand, in particular from large government-related entities, and the slow pipeline of government projects. Non-performing loan ratios have been rising but continue to compare very well by international standards.