Gulf banks entering ‘new era’ of weaker profits after coronavirus blow

Gulf banks entering ‘new era’ of weaker profits after coronavirus blow

Gulf banks are entering an age of weaker profits as a result of the coronavirus outbreak and a decline in crude prices, according to S&P Global Ratings.

“The pandemic and drop in oil prices could mark the start of a new era,” S&P analysts led by Mohamed Damak in Dubai said in a report. “This new era is characterised by a decline in oil wealth, a lower multiplier effect in the local economies, and lower profitability.”

Serious erosion in value of banking assets in pandemic-hit industries set to add to consolidation deals in region

With a sluggish economic recovery likely to hold back lending in the six-member Gulf Cooperation Council, a period of reduced profitability could be “longer lasting,” according to S&P. The rating company also predicts that regional banks' asset quality may