Coronavirus hits Gulf banks in Q2 but full impact of bad loans looms - Reuters

Coronavirus hits Gulf banks in Q2 but full impact of bad loans looms - Reuters:

Most Gulf banks’ profits plunged in the second quarter after a spike in impairment charges for expected credit losses, as regional economies reel from the double blow of low oil prices and the coronavirus outbreak.

But the banks may need to set aside even more money in the second half of the year to cover bad loans, as their full impact on banks has so far been curbed by stimulus measures allowing debt repayment delays, analysts say. 


“Given that we have payment holidays, the current asset quality metrics as measured by the non-performing loans, still does not fully reflect the true size of these non-performing loans,” said Ashraf Madani, a senior analyst at Moody’s.

“Hence we expect further pressure on provisioning charge once those NPLs (non-performing loans) get reflected in the financial position of banks and as they move to stage 3.”