Moody's Expects the Profits of Gulf Banks to Drop by 20 percent

  • GCC Countries
  • 8 October 2020
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Moody's expected an increase in the rate of mergers and acquisitions in the banking sector in the Gulf countries in the coming years, due to the continuing repercussions of the Corona pandemic and the decline in oil prices. According to the report, banks are facing strong challenges to reduce spending, due to declining levels of profitability and interest rate margins, in addition to higher provisions for credit losses and a decline in lending growth. Noting that the financial efficiency of banks will be an important factor in maintaining levels of profitability.

"Moody's" expected the economies of the Gulf countries to shrink between 3.5 to 6 percent in 2020, then return to growth between 2 and 3 percent in 2021, and also expected a decline in bank profits in the Gulf countries by 20 percent in 2021, which is a large percentage, and variable from country to country conditioned by the quality of the assets in those countries. It attributed the reason for this to the weak credit growth, the decline in interest rates, in addition to the large increase in provisions that reach 100% in some systems and banks.

Source (Al-Arabiya.net, Edited)