By Andy Sambidge
Rating agency says outlook for Gulf-based banks is stable; most positive about the UAE, Saudi and Kuwait
The rating outlook for almost all banks in the Gulf Cooperation Council (GCC) region remains stable, largely driven by the probability of sovereign support, Fitch Ratings said on Wednesday.
Regional unrest has a negative impact on banks' rating outlooks elsewhere in the Middle East, it said in a new report.
The sector outlook is also stable overall for 2014, although differences between countries are more pronounced, including within the GCC, Fitch added.
Fitch said it believes that there is a more positive trend in the UAE, Saudi Arabia and Kuwait.
Qatari banks also benefit from a supportive environment, although rapid growth may result in capacity limitations and asset quality problems, the report said.
On the other hand, the environment remains challenging in Egypt, Lebanon and Jordan, Fitch warned.
The rating agency said that it believes that impairment charges should fall, leading to a gradual improvement in profitability, although further recovery in asset quality will depend on continued economic growth.
Banks in non-GCC countries may suffer further problems due to continued political uncertainty and economic difficulties.
"Capital levels are generally sound and should be ample in 2014, unless there is significant loan growth. Within the GCC, the banks also enjoy ample liquidity, supported by substantial deposits placed by the governments and related entities," the Fitch report said.
Fitch also said that some Viability Ratings could be upgraded in the medium term, reflecting the banks' recovery from asset quality problems, as the operating environment improves, in particular in the UAE and Kuwait. Any recovery outside the GCC will primarily depend on political solutions to the current unrest, it added.