Financial performance of #Saudi banks will remain under pressure: S&P | ZAWYA MENA Edition

Financial performance of Saudi banks will remain under pressure: S&P | ZAWYA MENA Edition

The financial performance of rated Saudi banks will remain under pressure in 2021, on the back of lower interest rates and higher cost of risk, S&P Global Ratings said in a new report.

As regulatory forbearance measures are gradually phased out and the economy adjusts to the new normal, the cost of risk will remain elevated in 2021, increasing to 140 bps (from 80 bps in 2019), before starting to gradually normalize in 2022, the ratings agency said in the report “Banks In Emerging Markets: 15 Countries, Three Main Risks”

“Compared with other emerging markets, in our view Saudi banks have showed some resilience thanks to support from the Central Bank and minimal reliance on external funding. We see the banks as vulnerable to a spike in geopolitical risk.”

S&P analysts expect that banking systems in emerging markets (Argentina, Brazil, Chile, China, Colombia, India, Indonesia, Malaysia, Mexico, the Philippines, Russia, Saudi Arabia, South Africa, Thailand, and Turkey) will face three common risks in 2021: The expected deterioration in asset quality indicators as regulatory forbearance measures are lifted; a volatile geopolitical environment or domestic policy uncertainty; and vulnerability to abrupt movements in capital flows for a few.