(MENAFN- The Peninsula) DOHA: Banks in Qatar and Saudi Arabia are better placed than Gulf Cooperation Council (GCC) peers to cope with an eventual deterioration in asset quality brought about by a prolonged period of weak oil prices, Fitch Ratings said yesterday.
The ratings agency";s base case is that GDP will continue to grow in 2017 and 2018 across all GCC countries and it forecast a gradual rise in oil prices to $55 a barrel by 2018. Nevertheless, it examined the impact of lower for longer oil prices on asset quality across the region and concluded that loss-absorption capacity in the Saudi banking sector ranks highest among GCC countries and that both Saudi Arabia and Qatar would continue to offer the soundest lending opportunities under that scenario, suggesting impaired loan ratios should increase more slowly in these countries than their peers, Fitch said.
The operating environment is a positive ratings factor for banks in Qatar, Saudi Arabia and the UAE. According to Fitch, business opportunities are strongest in Saudi Arabia and the UAE, reflecting the countries"; larger and more diversified economies. In Qatar, it is not expecting any significant cuts to government spending and numerous government-sponsored projects continue to provide profitable, low-risk, lending opportunities for banks.
Relative to GCC peers, the operating environment has a neutral impact on bank asset quality in Kuwait, where we expect little change to government spending patterns, while in Oman and Bahrain, it weighs negatively on asset quality reflecting the smaller scale of public-sector spending and indirectly fewer lending opportunities in those countries.
Fitch";s loss-absorption capacity assessments hinge on three components.
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