(Special Report - Amazon)
Moody's Investor Service said today in a new report that the future outlook for the Saudi banking system will remain stable during the next 12 to 18 months.
Moody's said that the main driver for the stable outlook is the planned increase in government spending for 2019, which will boost the Saudi economy.
As a result, non-performing loans will stabilize and profits will remain strong, and modest loan growth will partly offset slowing deposit growth to maintain overall stable financial conditions.
Ashraf Madani, Moody's Vice President - Senior Analyst said: The troubled loans to Saudi banks will rise after increasing for several years at 2% to 2.25% in 2019, Although the remaining impacts of the recent economic downturn mean that the performance of construction and trade sector loans will remain under pressure.
Madani added: Non-oil GDP growth will increase from nearly 2.2% last year to 2.7% in 2019, with the increase in government capital expenditures. .
Moody's expected Saudi banks ’profitability to remain strong at 2.2% and with sufficient liquidity, with liquid assets comprising between 25% to 30% of banking assets during the forecast period . The likelihood of government support is high, but the regulatory environment is in development.
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