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

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.


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.