(MENAFN) Moody's Investors Service announced that it has maintained its negative outlook for Bahrain's banking system, due to challenging operating environment in the country, reported Arabian Business.
The agency said that the continuing social unrest that impacts investor sentiment is a main reason behind the negative outlook, which the country has held since 2009.
Moody's also said that the economic and political conditions prevailing in the country will also raise levels of non-performing loans (NPLs), which are expected to stay at nearly 8 percent of gross loans during the current year, mainly for the Kingdom's 8 largest retail banks, driven by a feeble real-estate sector, where supply outpaces demand.
The agency added that challenging conditions, including social instability, fragile consumer sentiment and a troubled property sector, will affect the local banks' asset quality and profitability over the 12-18 month outlook period, in spite of high government expenditure.
It is worth noting that Moody's projects Bahrain's non-oil gross domestic product (GDP) growth to decelerate to 3.5 percent in 2013 compared with 5 percent last year.