The Standard & Poor’s credit rating agency expected the main performance indicators of GCC banks to remain stable in 2024.
In a report, S&P Global said it expected continued strong credit growth and profitability for most Gulf banks in 2024, but with a slight decrease from the levels recorded in 2023.
The report confirmed that Gulf banks would continue to enjoy good capital, profitability, solid provisions and liquidity in 2024.
The agency indicated that the banking systems in the UAE and Saudi Arabia would maintain growth, outperforming the rest of their counterparts in the region, in light of strong demand for credit led by the active non-oil sector and programs to diversify the economy away from oil. Credit growth in banks in the Sultanate of Oman are also expected to remain strong, it added.
S&P Global pointed to potential risks to its expectations, which include the deterioration of the geopolitical environment, exposure to high-risk countries in the region and oil price volatility. But the agency said it believed that no situation would put the region’s financial stability to the test.
Accelerated growth of the GCC countries, with the exception of Bahrain
S&P Global said that real GDP growth is expected to accelerate for all GCC countries in 2024, with the exception of Bahrain. It added that non-oil growth will remain particularly active in Saudi Arabia and the UAE.
It is also expected that interest rates will remain high in the Gulf, and will fall by one percent by the end of the year, in line with the Federal Reserve’s moves.
The agency added that despite the fluctuation of supply and demand dynamics, it expects oil prices to remain generally stable during 2024, which will support the continuation of capital spending. But the continuation or deterioration of geopolitical tension represents a risk to this prospect, the report underlined.
Credit growth and asset quality
The agency said the economic environment would support credit growth, expecting it to slow only slightly, partly due to banks becoming more cautious about lending.
It added that credit growth will support profitability, but margins will begin to shrink by the end of the year, reflecting the effects of expected interest rates and higher financing costs.
