Financial performance of Saudi banks will remain under pressure: SP

Financial performance of Saudi banks will remain under pressure: SP

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”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.However, given the exceptionally low interest rates in several developed markets, analysts expect Saudi banks with sound credit fundamentals to retain good access to international capital markets.On the geopolitical side, with the new US administration, the potential reinstatement of the Iran nuclear deal could upset Saudi Arabia,