A report by Moody's expects that bank profits in the Gulf countries will decline by 20% in 2021, which is a large percentage, which will vary from country to another according to the quality of assets in those countries. .
According to Arabiya Net, the report attributed this to weak credit growth, declining interest rates, as well as a significant increase in provisions that reach 100% in some Systems and Banks.
The agency expects an increase in the pace 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.
The report indicated that banks are facing strong challenges to reduce spending, due to declining levels of profitability and interest rate margins, in addition to higher allocations for credit losses and a decline in lending growth.
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The report indicated that the financial efficiency of banks will be an important factor in maintaining profitability levels.
And to that, he pointed out that the decline in revenues will push bank managements to focus on reducing spending and opportunities for integration.
Gulf economies will shrink 6%
In a related context, Ashraf Madani, vice president and senior analyst at Moody's credit rating agency, predicted, in an interview with Al-Arabiya, a contraction of the economies of the Gulf states between 3.5 to 6% in 2020, then it will return to growth between 2 and 3% in 2021, but despite its shift to growth, it will remain weaker than historical levels, and this will put pressure on the operational environment of banks.
As for oil prices, a civilian forecast oil prices at $ 35 a barrel as an average in 2020, then prices rise to $ 45 in 2021, but remain below the price on which they are based Gulf budgets, therefore, will put pressure on government spending rates, thus on the non-oil economy.
