2021 to be 'toughest test for banks'; UAE lenders face weaker profits, asset quality | ZAWYA MENA Edition
Next year may be more challenging for banks in the UAE, as their asset quality and profitability are forecast to weaken on the back of continued slowdown in the economy and real estate sector.
Low oil prices, coupled with ongoing mitigating measures, such as the postponement of debt payments, could also result in more bad debts piling up, S&P said in its latest analysis.
“The fall in oil prices and economic slowdown will prompt a rise in problem loans and the cost of risk, at a time when the real estate sector was already under significant stress,” the ratings agency said in a report.
“Because of ongoing regulatory forbearance measures, we anticipate that non-performing loans will reach a peak in 2021,” it added.
The picture is no different in other markets. The ratings agency has predicted a more difficult year ahead for banks around the world, citing that 2021 “could turn out to be the toughest test” for lenders since the aftermath of the 2009 global financial crisis.
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