S&P Projects Further Decline in GCC Banks’ Profitability

S&P Projects Further Decline in GCC Banks’ Profitability

 

Banks in the GCC face an uphill struggle in the next 18 months due to the protracted nature of the economic recovery and the expected gradual withdrawal of regulatory forbearance measures, S&P Global Ratings said.

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In its latest forecast, the global ratings agency said GCC banks' profitability would continue declining, with a few of them reporting losses because of their exposure to high-risk asset classes or under-provisioning.

 

"This will push banks' management teams to look more carefully at costs, try to leverage opportunities related to fintech and reduce the number of physical branches. Without additional support measures, we expect the deterioration in GCC banks' asset quality to accelerate as regulatory forbearance measures end," said Mohamed Damak, primary credit analyst at S&P.

On the positive side, most GCC banks have good funding profiles and