Banks will focus more on preserving asset-quality indicators than generating new business.
Conventional and Islamic banks in the GCC countries will see a drop in revenue and credit growth in 2020, according to S&P Global Ratings.
The sharp drop in oil prices and measures implemented by regional governments to contain transmission of the coronavirus (COVID-19) will take a toll on sectors such as real estate, hospitality, the rating agency said in a new report.
“Under our base-case scenario, we assume that these measures will be relatively short-lived and forecast a gradual recovery in non-oil activity from third-quarter 2020. However, severe shock could cause irreparable damage to some parts of the non-oil economy. Furthermore, if the recovery takes longer than we expect, GCC banks could feel greater pressure,” Mohamed Damak, primary credit analyst, said in the report.
Both Islamic and conventional GCC banks’ profitability will take a hit in 2020, the note said. This is because financing growth will remain limited, with banks focusing more on preserving their asset-quality indicators than generating new business amid the COVID-19 pandemic.
