Gulf banks to benefit from financial buffers

Updated 06 December 2017
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Gulf banks to benefit from financial buffers

LONDON: Gulf banks are expected to benefit from an uptick in the regional economy next year, according to Moody’s.
The credit ratings agency said the outlook for GCC banks was stable — reflecting strong financial fundamentals, particularly in the largest banking systems.
Still, fiscal and geopolitical challenges remain for some economies in the Gulf, it said in a report released on Wednesday.
It forecasts that real GDP growth in the region will pick up slightly to around 2 percent in 2018 from no growth in 2017, as oil prices stabilize between $50 and $60 a barrel.
“Although fiscal consolidation efforts in the region will persist, key regional infrastructure projects, such as UAE Expo 2020, World Cup Qatar 2022 and the Saudi National Transformation Program will support capital spending and credit growth which should expand by 5 percent in 2018,” Moody’s said.
Low cost and stable funding, combined with elevated liquidity buffers will remain a credit strength of GCC banks.
In 2017, governments injected liquidity from international debt issuances, thereby easing a lengthy funding squeeze which had stemmed from low oil prices.
“The strong financial fundamentals in the Gulf banking systems makes the industry more resilient to lower profitability and weaker loan quality issues,” said Olivier Panis, a vice president and senior credit officer at Moody’s.
“Nonetheless, fiscal and geopolitical risks pose challenges in Qatar, Oman and Bahrain.”
Individually, in the UAE, Saudi Arabia and Kuwait, which account for around three quarters of GCC banking assets, the outlook is stable.
However Bahrain and Oman are more weakly positioned.
In Qatar, a diplomatic row with several other GCC members has severely impacted trade and tourism, putting pressure on banks’ loan quality, Moody’s said.
Problem loans for the region’s banks are expected to increase next year following sluggish economic activity in 2017, and banks remain vulnerable to high borrower and sector loan concentrations.


Potential SABIC deal would affect Saudi Aramco IPO time frame, says CEO Nasser

Updated 20 July 2018
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Potential SABIC deal would affect Saudi Aramco IPO time frame, says CEO Nasser

JEDDAH: A potential deal to buy a stake in petrochemical maker SABIC would affect the time frame of Saudi Aramco's initial public offering (IPO), the oil firm's president and CEO Amin H. Nasser said Friday. 

The IPO of around 5 percent of Aramco, which was initially to take place this year but is now more likely to happen later, would be the world's biggest listing, raising up to $100 billion.

Nasser said that buying a stake in a chemical company like SABIC would positively affect Aramco's revenue, Al Arabiya reported.

“We are still in the very early stages of the discussion to buy a stake in SABIC,” the Aramco CEO said.

“Aramco is ready for the initial offer and the timing remains subject to the state's decision.”

Saudi Aramco said on Thursday it is looking at the possibility of buying a stake in SABIC, a move that could boost the state oil giant’s market valuation ahead of the planned IPO.
Aramco said in a statement that it was in “very early-stage discussions” with the Kingdom’s Public Investment Fund (PIF) to acquire the stake in SABIC via a private transaction. It has no plans to acquire any publicly held shares, it said.
In a separate statement, PIF also said talks about a sale were in early stages. “There is a possibility that no agreement will be reached in relation to this potential transaction,” it said.