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Tribune News Network
Doha
GCC banks have a cushion to absorb losses thanks to their aggregate net income of around $34.7 billion in 2019, Moody’s Investors Service has said in its latest report.
“Banks in the GCC region will see profits fall this year as economies shrink amid the coronavirus outbreak and lower oil prices, but have adequate capital underpinning their solvency,” Moody’s said in the report.
“The economies of all six GCC countries will contract, sapping the banks’ two main income streams of interest on loans, and fees and commissions, while provisioning charges for loan losses will rise sharply,” Nitish Bhojnagarwala, senior credit officer at Moody’s, said.
“The banks’ capital will remain adequate, however, underpinning their solvency.”
“Economic recession will weigh on the creditworthiness of both corporate and household borrowers,” said Bhojnagarwala.
“Banks will feel the effects through rising non-performing loans, requiring higher provisioning charges, which are expected to increase significantly from $11.7 billion recorded for Moody’s rated banks for 2019,” it said.
In a report earlier, S&P Global had said that the GCC region may see a second wave of bank mergers and acquisitions that will be driven by economic rationale in the post COVID-19 era.
The pandemic lockdown will halt the growth of GCC Islamic and conventional banks this year as they focus on preserving asset quality rather than business expansion.
Even months before the epidemic outbreak, the GCC banking sector was undergoing a major consolidation phase with 20 banks negotiating mergers and acquisitions with an estimated $1 trillion worth of assets.
The top 10 banks in the GCC grew their assets by 1.7 percent during the quarter accounting for 53.3 per cent of the total GCC banking sector assets.
GCC banks rated by Moody’s delivered aggregate net income of around $34.7 billion in 2019, providing a cushion to absorb losses. Higher provisions and lower income will result in an average decline in full-year net profit of more than 20 percent.
Good provisioning coverage for systems such as in Kuwait, Qatar and Saudi Arabia will provide an additional cushion. Consequently, capital may dip slightly but will remain sufficient amid a lower asset base and low dividend payouts.
Moody’s expects real non-hydrocarbon GDP in the GCC to contract between 3.5 per cent and 5 percent in 2020.
Doha
GCC banks have a cushion to absorb losses thanks to their aggregate net income of around $34.7 billion in 2019, Moody’s Investors Service has said in its latest report.
“Banks in the GCC region will see profits fall this year as economies shrink amid the coronavirus outbreak and lower oil prices, but have adequate capital underpinning their solvency,” Moody’s said in the report.
“The economies of all six GCC countries will contract, sapping the banks’ two main income streams of interest on loans, and fees and commissions, while provisioning charges for loan losses will rise sharply,” Nitish Bhojnagarwala, senior credit officer at Moody’s, said.
“The banks’ capital will remain adequate, however, underpinning their solvency.”
“Economic recession will weigh on the creditworthiness of both corporate and household borrowers,” said Bhojnagarwala.
“Banks will feel the effects through rising non-performing loans, requiring higher provisioning charges, which are expected to increase significantly from $11.7 billion recorded for Moody’s rated banks for 2019,” it said.
In a report earlier, S&P Global had said that the GCC region may see a second wave of bank mergers and acquisitions that will be driven by economic rationale in the post COVID-19 era.
The pandemic lockdown will halt the growth of GCC Islamic and conventional banks this year as they focus on preserving asset quality rather than business expansion.
Even months before the epidemic outbreak, the GCC banking sector was undergoing a major consolidation phase with 20 banks negotiating mergers and acquisitions with an estimated $1 trillion worth of assets.
The top 10 banks in the GCC grew their assets by 1.7 percent during the quarter accounting for 53.3 per cent of the total GCC banking sector assets.
GCC banks rated by Moody’s delivered aggregate net income of around $34.7 billion in 2019, providing a cushion to absorb losses. Higher provisions and lower income will result in an average decline in full-year net profit of more than 20 percent.
Good provisioning coverage for systems such as in Kuwait, Qatar and Saudi Arabia will provide an additional cushion. Consequently, capital may dip slightly but will remain sufficient amid a lower asset base and low dividend payouts.
Moody’s expects real non-hydrocarbon GDP in the GCC to contract between 3.5 per cent and 5 percent in 2020.
