News

Saudi banks will struggle to protect profits

Profit_protectionProfit growth at the five largest banks in Saudi Arabia will stall in the coming 12 to 18 months as the economy slows. The warning, from ratings agency Moody's, predicts that banks NCB, Al Rajhi, Samba Financial, Riyad and Banque Saudi Fransi will have to deal with higher loan-loss provisions due to the weakening economy and new accounting standards. “Lower government spending is eroding economic growth and slower growth is dampening credit demand and weakening borrowers' debt repayment capacity,” said the Moody's report. The agency said Al Rajhi was best positioned to protect its profits during the period because of its strong retail franchise. Banks with large corporate books will be hardest hit, it said, because their clients are exposed to falling government spending on infrastructure and other construction projects. The Saudi government is having to cut funding for various state-sponsored projects due to the low price of oil, which has dramatically reduced the government's income. ©2017 funds global mena

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