By Soren Billing
Analysts say regional loan growth stalled amid fears over exposure to troubled Saudi firms.
The recovery in the Gulf’s finance sector lost its impetus in June as regional loan growth stalled and uncertainty over exposure to stressed regional conglomerates Al Gosaibi and Saad Group weighed on banking stocks, Al Mal Capital said on Wednesday.
The UAE’s pledge to guarantee bank bonds may not alleviate the liquidity concerns expressed by the country’s lenders, the Dubai-based investment bank said in a note to investors.
“We are doubtful about the impact on kick starting loan growth as the banks are reticent to extend loans into a fundamentally deteriorating economic environment,” a team of analysts wrote.
Uncertainty over the recapitalisation of Amlak and Tamweel remains, and even if the two companies were to resume lending, the impact on the mortgage market would be limited until real estate prices have hit bottom.
In Saudi Arabia, loan growth has dropped by 1.3 percent since the end of last year and concerns over exposure to troubled family conglomerates Al Gosaibi and Saad Group are weighing on banks across the region, Al Mal noted.
“Much of the potential exposure is unaccounted for, and a lack of disclosures is causing investor concern. In addition, as a derivative effect the health of large regional family conglomerates that were previously considered stable are now being called into question,” it said.