By Sam Bridge
S&P Global Ratings says geopolitical risk, oil price fall are possible challenges facing Saudi banks next year
Rated banks in Saudi Arabia should maintain stable financial risk profiles in 2020, barring any unexpected increase in geopolitical risk or a major fall in oil prices, according to S&P Global Ratings.
The agency said in a new report that it believes the Saudi economy will recover from its 2019 slowdown.
"We do not envisage these scenarios in our base case, however, we cannot exclude event risk as demonstrated by the recent attack on Saudi oil infrastructure," said S&P Global Ratings credit analyst Roman Rybalkin.
"We believe the Saudi economy will recover from the 2019 recession, linked to the attack, next year. In our view, government spending should somewhat revitalise corporate lending, although mortgages are still likely to lead credit growth, which will stay at about 5 percent."
Rybalkin added that the cost of risk should also stabilise at about 75 basis points on the back of buffers created thanks to International Financial Reporting Standards 9.
He also said in a the report that he expects Saudi banks' profitability to decline slightly as global monetary policy softens and rates decline.