Saudi Economic Slowdown Raises NPL Risk
Saudi Economic Slowdown Raises NPL Risk

Saudi Economic Slowdown Raises NPL Risk

Saudi Economic Slowdown Raises NPL Risk

The liquidity of Saudi Arabian banks has improved since last year, but a slowdown in the kingdom’s economy would likely cause a rise in non-performing loans, Fitch Ratings said.
Most of the public-sector deposits that were drained from the banking system last year due to a weakness in oil prices have since returned and the government has already paid most its overdue payments to contractors, the ratings agency said, Reuters reported.
“Funding costs, which spiked during the 2016 tightening, have fallen back toward the very low levels to which most Saudi banks had become accustomed,” Fitch Ratings said.
Fitch Ratings said that most Saudi lenders had liquidity coverage ratios above 200% during the end of the first half, which it viewed as “strong”.
“Another wave of government deposit withdrawals is less likely now that Saudi Arabia is partly financing its fiscal deficit with international sovereign debt issuance.”
The kingdom raised $12.5 billion from international investors last month, the third time it has accessed global bond markets in less than a year. It sold $17.5 billion worth of conventional bonds last October and in April the kingdom issued a $9 billion Islamic bond.
“We expect a rise in the sector’s NPL ratio and muted credit demand in the second half of 2017 and 2018, reflecting the slowing economy,” according to Fitch Ratings, with GDP growth expected to further weaken to below 1% this year and in 2018, from 3.4% in 2015 and 1.4% last year.
Despite expectations of higher non-performing loans, Fitch Ratings said that Saudi lenders would remain aptly covered as NPL levels would be very “low by global standards and loan-loss coverage is strong.”
Meanwhile, Saudi Arabia’s central bank is preparing tougher rules for insurance companies as part of a drive to create a smaller number of stronger market players operating in the country, two people with direct knowledge of the matter told Reuters.
A new supervisory framework will be introduced in the coming months that will force insurers to boost capital significantly as well as improve internal risk controls, said the sources, who declined to be named due to the sensitivity of the matter.
The moves are aimed at triggering consolidation in the insurance industry and forcing weaker companies to merge with stronger ones, industry analysts said.
 “They (central bank officials) said half of the companies that are here today will not be here,” one of the sources said. “They want stronger companies in the market.”

Short URL : https://goo.gl/m6b3mK
  1. https://goo.gl/YbgUBa
  • https://goo.gl/P5Thhf
  • https://goo.gl/SPT45R
  • https://goo.gl/ifkbR5
  • https://goo.gl/wgKEig

You can also read ...

Bithumb Hacked, $32m in Cryptocurrency Stolen
Cryptocurrencies dropped after the second South Korean...
South Africa GDP Shrinks
South African gross domestic product shrank 2.2% in the first...
Washington in March imposed tariffs of 25% on steel and 10% on aluminum, in a move mainly aimed at curbing imports from China.
Russia said on Tuesday it would impose import duties on US...
Saudi Arabia, which employs about two-thirds of its citizens, is chipping away at a budget deficit that ballooned to almost 16% of GDP after the oil shock of 2014, while FDI slumped more than 80% last year.
Show up, swipe in. The routine is familiar to office workers...
Taxes in Italy Drive Economy Underground
Italy grew rapidly over the 20th century, and its black market...
European businesses say it has become harder to do  business in China over the past year.
European companies complain they still face a tough business...
Australian Telecom Co. to Axe 8,000 Jobs
Australia’s dominant telecommunications company Telstra...
South Korea to Grow 3 Percent
The Organization for Economic Cooperation and Development has...

Add new comment

Read our comment policy before posting your viewpoints