Why Saudi banks are better positioned in 2021 compared to GCC peers | Banking – Gulf News
Saudi banks are entering the New Year from a position of advantage with higher loan growth and relatively low impairments reported in in the first three quarters of 2020.
Despite the challenging operating environment posed by COVID-19 and drastic fall in oil prices, 2020 was not such a bad year for the Saudi Banks, according to Bank of America Merrill Lynch (BoAML) analysts.
The Saudi banks, like others in the Middle East North Africa region, have faced the perfect storm of falling interest rates and a weak and increasingly uncertain economic outlook, with the Saudi economy forecast to shrink 5.6 per cent by the IMF in 2020.
“Yet despite this, the Saudi banks have fared strongly, with system loan growth having reached 11 per cent year to date (and 14 per cent year on year at the close of the third quarter 2020),” said a BoAML note.
Banking sector revenues improved 3 per cent year to date largely by lower cost of funds resulting from 50 billon riyal interest free government deposits. The year saw banks limiting decline earnings despite a 34 per cent spike in impairments largely through cost control measures.
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