GCC banks can soak up shock of mortgage losses of as much as $ 45 billion as pandemic impression lingers: S&P
DUBAI: Gulf banks can maintain credit score losses of as much as $ 45 billion, S&P World stated, as companies and people get well from the impression of the COVID-19 pandemic.
Gulf Cooperation Council (GCC) banks have put aside $ 10.9 billion in further credit score loss provisions over the previous 12 months, in response to the report, to cowl the anticipated destructive impression of the pandemic, in addition to falling oil costs.
“We anticipate extra provisions in 2021, as regulatory tolerance measures are lifted by regulators and banks acknowledge the total impression of the shock,” the report stated.
It comes at a time when banks’ efficiency stays restricted by low rates of interest.
“Regardless of the regulatory abstention measures, which allowed banks to clean the decline in profitability, the price of danger for rated banks elevated by practically two-thirds to achieve 150 foundation factors (bps) on the finish of 2020 towards 90 bps on the finish of 2019, ”the report says.
However banks stay worthwhile in 2020, the report notes, with just a few posting statutory losses.
“The excessive contribution of web curiosity earnings of GCC banks to complete turnover, excessive margins and good operational effectivity additionally contributed to their efficiency,” he added.
Saudi banks have the best loss absorbing capability, in response to the evaluation, as a consequence of their excessive profitability.
Final week, S&P World stated it anticipated GDP development within the Gulf, slowly recovering from final 12 months’s COVID-19 blow.
He added that there could be “long-term destructive results” on the banking sector, however banks in Saudi Arabia and Qatar will probably be much less affected than in different nations.
“Nonetheless, sturdy and secure capital buffers, good funding profiles and anticipated authorities assist ought to proceed to strengthen banks’ solvency in 2021,” the report concludes.