June 22, 2024

Saudi’s Banking profits continued to surge ahead despite clogged down by Asset-based pressure stated Fitch-The Ratings Agency

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  • As per the Fitch-The Ratings Agency findings noted that the Saudi Banks witnessed a small business growth and subsequently it also affected the loan growth, which in turn was primarily influenced by lower government spending during 2018.
  • According to a new report by Fitch Ratings, the Saudi Banks profitability improved during 2018 despite the continued pressure in offering from the asset quality based on a challenging operating environment.
  • The report also stated that with the deposit, loan growth, etc. being roughly on the line, and equally supported by solidity in the capital ratio as well as sound funding and liquidity.

Based on lower government spending and weaker consumer confidence, the rating agency also stated that Saudi Banks witnessed a slow yet a little potential growth in the newer business as well as a decline in low loan growth.

The rating agency in its report also stated that during 2018, the Saudi Banking institutions started witnessing a decline in loan impairment charges (LICs) to average gross loans and write-off ratios that remained higher.

However, the operating profit/risk-weighted assets improved in 2018 based on resolute net interest margins, lower LICs, and better cost-efficiency.

The Fitch also mentioned in the report through its findings that 2019 will be a year of mixed bag effect as the loan growth will be likely to be amidst mid-single digits while the asset-quality metrics being remaining under turmoil, mainly related with contracting and retail/wholesale trade being most effected until being bailed out by resurgence of higher government spending being visible on the private sectoral growth.

Cashing upon better liquidity in the system with higher oil prices, a rise in deposit growth, low loan growth and new massive issuance by the government and related entities, the funding-based turmoil continued to ease down during 2018 and is staying in 2019.

During 2018, it also added that the average gross loans-to-deposits ratio was stable at 85 percent and core capital ratios also remained stronger with lower loan growth and amidst a reasonable internal capital generation.

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