Liquidity of Saudi banks has improved, but economic slowdown raises NPL risk

Fitch Ratings expects Saudi GDP growth to further weaken to below 1 percent this year and in 2018, from 3.4 percent in 2015 and 1.4 percent in 2016. (Reuters)
Updated 13 October 2017
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Liquidity of Saudi banks has improved, but economic slowdown raises NPL risk

DUBAI: The liquidity of Saudi Arabian banks has improved significantly since last year, but a slowdown in the Kingdom’s economy would likely cause a rise in non-performing loans, Fitch Ratings said.
Most of the public-sector deposits that were drained from the banking system last year due to a weakness in oil prices have since returned and the government has already paid most its overdue payments to contractors, the ratings agency said.
“Funding costs, which spiked during the 2016 tightening, have fallen back toward the very low levels to which most Saudi banks had become accustomed,” Fitch Ratings said.
Fitch Ratings said that most Saudi lenders had liquidity coverage ratios above 200 percent during the end of the first half, which it viewed as “strong.”
“Another wave of government deposit withdrawals is less likely now that Saudi Arabia is partly financing its fiscal deficit with international sovereign debt issuance.”
The Kingdom raised $12.5 billion from international investors last month, the third time it has accessed global bond markets in less than a year. It sold $17.5 billion worth of conventional bonds last October and in April the Kingdom issued a $9 billion Islamic bond.
“We expect a rise in the sector’s NPL ratio and muted credit demand in the second half of 2017 and 2018, reflecting the slowing economy,” according to Fitch Ratings, with GDP growth expected to further weaken to below 1 percent this year and in 2018, from 3.4 percent in 2015 and 1.4 percent last year.
Despite expectations of higher non-performing loans, Fitch Ratings said that Saudi lenders would remain aptly covered as NPL levels would be very “low by global standards and loan-loss coverage is strong.”
“Even factoring in delinquent loans that are not impaired, watch-listed exposures and restructured loans, we consider the sector’s overall asset quality to be strong,” Fitch Ratings added.


Iraq’s Basra Oil, Chevron agree to implement MOU to develop oil fields

Updated 19 August 2018
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Iraq’s Basra Oil, Chevron agree to implement MOU to develop oil fields

  • Executives from the two companies have signed an agreement which outlines a program to develop the fields
  • The MOU provides for Chevron to conduct surveys and studies on oil sites and installations

DUBAI: Iraq’s state-run Basra Oil Company and Chevron agreed to begin implementing a memorandum of understanding to develop fields in the south of the country, the Iraqi oil ministry said on Sunday.
Executives from the two companies have signed an agreement which outlines a program to develop the fields, which includes studies to survey the reservoirs and extraction operations, said a statement posted on the oil ministry’s website.
Iraqi Oil Minister Jabar Al-Luaibi announced in June that Basra Oil and another state-run company, Dhi Qar Oil, signed an MOU with Chevron.
The MOU provides for Chevron to conduct surveys and studies on oil sites and installations and help the two Iraqi companies to improve their technical, administrative and financial performance.