Loan growth of Saudi banks to improve in 2010
The performance of Saudi banks will improve in 2010 as economic conditions improve. After witnessing declining levels of lending in 2009, as banks became more cautious given the more challenging operating environment, loan growth is expected to resume in 2010, although not at the rates seen in 2008, said Malek Soubra, Associate Director in Fitch Rating's Financial Institutions team.
It said 2009 was a challenging year for banks in Saudi Arabia as the full impact of the global economic crisis caught up with the region, reflected in rising loan impairments and a rapid slowdown in lending. The preliminary 2009 results released by the 10 main Saudi commercial banks rated by Fitch showed different trends in net income in 2009, with Q4 being the worst quarter of the year.
In addition, the 10 main commercial banks in Saudi Arabia rated by Fitch remain among the highest-rated banks across the Gulf Co-operation Council (GCC). Their long-term issuer default ratings largely remain driven by the extremely high probability of support from the Saudi Arabian government (rated 'AA-'/stable outlook) and are unlikely to change unless the sovereign rating changes. Their individual ratings reflect their generally sound domestic franchises and financial strength. Fitch noted five of the 10 largest commercial banks operating in Saudi Arabia showed improvements in their net income yaer-on-year, but overall growth in total net income for all 10 banks stagnated in 2009 y-o-y.
Areas of concern included lower domestic economic growth.
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