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Outlook for Bahraini banks negative - Moody's

The credit outlook for Bahraini banks continues to be negative as debt markets could remain challenging for the next 12 to 18 months, Moody’s has said.

Although less severe than in other parts of the world, the economic slowdown in the GCC is putting pressure on asset prices and business volumes, the ratings agency said in a report.
“The negative outlook is also driven by the more challenging wholesale funding conditions in the GCC within the context of the global financial crisis and consequent risk repricing," said senior analyst George Chrysaphinis.

An increase in non-performing loans is likely but does not necessarily mean that ratings will be downgraded.

Loans to the construction and real estate sectors are an area of particular concern, Moody’s said.

On a positive not, Moody's said the ample capital levels of the rated Bahraini retail and wholesale banks means that they are able to absorb credit losses and that it is unlikely that additional capital will be required

Retail banks are unlikely to be materially affected by the ongoing slowdown, given their focus on bilateral corporate lending and retail finance and their solid deposit funding profiles.

By contrast, wholesale banks will face challenges due to the current wholesale funding climate, it said.

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