(MENAFN- Khaleej Times) Gulf banks, which suffered during the 2008 global financial crisis, have gradually recovered and currently benefit from adequate liquidity based on the highly liquid local deposit markets and improvements to corporate asset quality, Standard & Poor's Ratings Services said on Tuesday
Banks in the GCC are also well-positioned in a scenario where the US moves to gradually normalise its monetary policy, it said
Moody's also predicted the outlook as stable for banks in the UAE, Kuwait, Oman, Qatar and Saudi Arabia, given the rating agency's expectation of high fiscal surpluses and increased public spending, which will continue to underpin the banks' high loss-absorption capacity and sound funding and liquidity
"We expect the region's healthy economic growth prospects for 2014, supported by high oil prices, to keep demand for bank credit high and enable local banks to increase their earnings," said S&P analysts
Most banks in the key banking markets in the Gulf region are likely to have healthy funding profiles, with sound, high-quality capital, in 2014. This will enable them to continue to exhibit healthy credit growth funded by liquid local deposit markets, S&P said
"Although low interest rates continue to limit Gulf banks' net interest margins, most banks have seen a gradual decline in loan losses. We expect this to continue to support earnings growth in 2014, but by less than in previous years," the ratings agency said
However, S&P warned that the Gulf region's dependence on the hydrocarbons sector remained a structural risk factor. "Volatile commodity prices could have a significant impact on Gulf economies. In our view, certain restructured exposures in Kuwait and the UAE could also generate downside risks. However, we consider that the banks' strong capital levels largely mitigate these risks. As a result, we expect ratings to be broadly stable through 2014; of the 26 banks we rate in this region, 17 have a stable outlook," analysts at S&P said
Last month, Moody's said it expects GCC banks' ratings to remain broadly stable across the region for 2014, with the rating agency's real GDP growth forecasts of between three per cent and five per cent in 2014
"This growth will generate healthy surpluses for the region's governments, which will be channeled into the economy through widespread infrastructure spending, boosting corporate borrowing," Moody's said
Standard & Poor's credit analyst Engin Timucin said over the past six months, there has seen signs that credit growth is picking up. "We expect these trends to provide banks with another year of strong financial performance, and they support our stable rating outlooks in the sector
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