Saudi banks stable despite oil price drop, says S&P

Saudi banks stable despite oil price drop, says S&P
Gulf banks have typically strong capital bases and are well placed to cope with economic shocks. (AFP)
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Updated 14 May 2020

Saudi banks stable despite oil price drop, says S&P

Saudi banks stable despite oil price drop, says S&P
  • The Kingdom’s banking sector is well placed to cope with the coronavirus fallout

LONDON: Saudi banks are expected to have enough capital to weather the economic stress created by the coronavirus pandemic, S&P said.

The ratings agency which assesses the creditworthiness of countries and companies believes the Kingdom’s banking sector is well placed to cope with the coronavirus fallout even if lenders are likely to see their cost of risk rise and their net interest income fall.

“We believe Saudi banks will have sufficient capacity to absorb this stress, despite a decline in net interest margins, which still compare well with those of most peers,” S&P said. “Notwithstanding the expected decline in profitability, most Saudi banks will remain profitable in 2020 and 2021 under our base case scenario.”

Mortgage lending is also expected to tick up in the coming years following the relaxation of capital requirements by the Saudi Arabian Monetary Authority (SAMA), S&P said.

Gulf banks have typically strong capital bases and are well placed to cope with economic shocks as they have relatively large sums on deposit that do not pay high interest rates. Rated GCC banks could absorb up to a $36 billion shock in additional credit losses before starting to deplete their capital base, S&P estimates.

While the profitability of some lenders may decline in the wake of the pandemic, most Saudi banks were still likely to remain profitable in 2020 and 2021, S&P said.

Saudi banks are the most resilient in the region to credit losses, according to the agency, while Bahraini banks are the least resilient due to limited government capacity to support the sector. 


Row erupts in parliament as Kuwait approves budget

Row erupts in parliament as Kuwait approves budget
Updated 13 min 51 sec ago

Row erupts in parliament as Kuwait approves budget

Row erupts in parliament as Kuwait approves budget
  • Parliamentary guards entered the hall to restore order as opposition and pro-government MPS quarrelled

KUWAIT CITY: Kuwait’s parliament approved the 2021-22 state budget in a tense session that managed to temporarily break a deadlock with the government that has blocked reforms in the Gulf state.

But chaos broke out after the vote, supported by 32 out of 63 lawmakers in attendance including 50 elected members and government ministers. Parliamentary guards entered the hall to restore order as opposition and pro-government MPS quarrelled.

The session had gone ahead despite opposition lawmakers once again occupying seats reserved for ministers, a tactic they have used in recent weeks to try to highlight their demand to question the prime minister.

Speaker Marzouq Al-Ghanim called for a special session to discuss the budget at a time when the OPEC nation is trying boost state finances and support an economy that shrank 9.9 percent in 2020 due to low oil prices and the coronavirus pandemic.

The budget, proposed by the government in January, had projected 23.05 billion dinars ($76.65 billion) in expenditure for the fiscal year that started on April 1, and a deficit of 12.1 billion dinars.

“We have the right to request a special session because all regular sessions have been disrupted,” Ghanim said.

Ministers stood at an entrance to the hall after MPs took their seats and some lawmakers had rapped on tables to try to disrupt the discussions.

Frequent rows between the government and assembly have over decades led to successive cabinet reshuffles and dissolutions of parliament, hampering investment and reform.

Lawmakers want to question Prime Minister Sheikh Sabah Al-Khalid Al-Sabah over the constitutionality of a motion passed in March delaying any questioning of the premier until the end of 2022 along with other issues such as corruption.

Although the emir has final say over state matters, Kuwait is the only Gulf monarchy to give substantial powers to an elected parliament, which can block laws and question ministers.


Dubai investment arm posts $5.1 billion loss amid pandemic

Dubai investment arm posts $5.1 billion loss amid pandemic
Updated 36 min 46 sec ago

Dubai investment arm posts $5.1 billion loss amid pandemic

Dubai investment arm posts $5.1 billion loss amid pandemic
  • It marks the first loss in years for the investment arm of Dubai government, which boasts a range of assets, including the Middle East’s largest airline, Emirates

DUBAI: Dubai’s state-owned sovereign wealth fund announced Tuesday a net loss of $5.1 billion over the past year, highlighting the toll that the coronavirus pandemic has wrought on the company’s vast assets and the uncertainty around the emirate’s post-pandemic recovery.
The Investment Corporation of Dubai, the huge holding company behind many of the emirate’s industrial powerhouses, reported revenue of $37 billion in 2020, a sharp drop of over 40 percent compared to the year before.
It marks the first loss in years for the investment arm of Dubai government, which boasts a range of assets, including the Middle East’s largest airline, Emirates, the lucrative Dubai Duty Free and master-developer Emaar Properties, which built the Burj Khalifa, the world’s tallest tower. The firm turned a profit of $4.9 billion in 2019.
In reporting the loss, the conglomerate cited the severe effects of the coronavirus on travel, hospitality, retail and real estate — all industries that power Dubai, with its cavernous malls and luxury hotels. With 40 major holdings, the firm is often viewed as a barometer for the health of the city’s service-heavy economy.
Any profits churned out last year largely stemmed from the fund’s holdings in financial services such as Emirates NBD, among the top banks in the United Arab Emirates, which it said remained solid amid the pandemic’s upheaval.
The Investment Corp. report came a week after long-haul carrier Emirates posted a staggering loss of $5.5 billion in 2020 — its first in three decades as the travel industry faced a downturn like no other. The Dubai government extended the struggling airline a $3.1 cash infusion as its revenue dropped 66 percent — a vivid sign of just how critical Emirates Air is to Dubai, a futuristic city-state between Europe and Asia founded on the promise of globalization. For comparison, during the 2015-2016 fiscal year, Emirates netted profits of $1.9 billion — a record it has not repeated since.
In its statement, ICD described the many headwinds of 2020, from grounded flights to low oil prices. Although Dubai is not oil-rich like the UAE’s capital of Abu Dhabi, its economy feeds on petrodollars.
Despite the challenges, Mohammed Al-Shaibani, the company’s CEO, focused on hopes for a rebound in tourism and travel, stoked by the UAE’s vaccination campaign, among the fastest in the world.
“Our businesses are today strongly positioned to seize the opportunities presented by global economic activities now gaining momentum with the international vaccine roll-out,” Al-Shaibani said.


Abu Dhabi opens up free COVID-19 vaccines to tourists

Abu Dhabi opens up free COVID-19 vaccines to tourists
Updated 22 June 2021

Abu Dhabi opens up free COVID-19 vaccines to tourists

Abu Dhabi opens up free COVID-19 vaccines to tourists
  • Infections have risen in the UAE in the past month, and Abu Dhabi still has restrictions on entry, including home quarantine and PCR testing at intervals after arrival

DUBAI: Abu Dhabi, the capital of the United Arab Emirates, is offering tourists free COVID-19 vaccinations that were previously restricted to UAE citizens and residency visa holders.
There is no indication that the change applies to Dubai, the most populous emirate, or the other five emirates that make up the UAE.
Visitors with visas issued by Abu Dhabi and passport holders eligible for tourist visas when they arrive in the UAE through Abu Dhabi can book free vaccines, according to information provided by the Abu Dhabi Health Services Company (SEHA), which operates the emirate’s public health infrastructure.
Holders of expired residency or entry visas are also eligible for free vaccinations, Abu Dhabi Media Office said on June 11.
Job losses and travel restrictions during the pandemic mean some people’s residency visas have expired or have been canceled when they were made redundant.
UAE Health authorities said this month nearly 85 percent of the eligible population had received at least one vaccine dose, but did not say how many had had two doses.
Infections have risen in the UAE in the past month, and Abu Dhabi still has restrictions on entry, including home quarantine and PCR testing at intervals after arrival. People driving from other emirates are tested to show they are not infected.
Travelers from 27 countries including China, Germany and the United States can enter without quarantine on arrival.
SEHA offers COVID-19 vaccines by China’s state-owned drugmaker Sinopharm and by Pfizer/BioNTech in Abu Dhabi.
Dubai Media Office did not immediately respond to a request for comment on whether eligibility criteria was to change. Dubai Health Authority information says vaccines are given only to citizens and holders of valid Dubai residency visas.


OPEC+ said to discuss gradual oil output rise from August

OPEC+ said to discuss gradual oil output rise from August
Updated 22 June 2021

OPEC+ said to discuss gradual oil output rise from August

OPEC+ said to discuss gradual oil output rise from August
  • OPEC+ is returning 2.1 million barrels per day (bpd) to the market from May through July as part of a plan to gradually unwind last year’s record oil output curbs

DUBAI: OPEC+ is discussing a further gradual increase in oil output from August as oil prices rise on demand recovery, but no decision had been taken on the exact volume yet, two OPEC+ sources familiar with the talks said on Tuesday.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, is returning 2.1 million barrels per day (bpd) to the market from May through July as part of a plan to gradually unwind last year’s record oil output curbs. OPEC+ meets next on July 1.
“It is highly possible to increase gradually from August,” said one of the sources, adding that no final decision had been made and the exact volumes are yet to be agreed on.
Crude oil prices rose on Tuesday, with Brent hitting $75 per barrel for the first time since April 2019, as investors remained bullish about recovery in oil demand and concerns eased over a quick return of Iranian crude to the market.


Does Iceland tourism rebound provide hope for Dubai?

Does Iceland tourism rebound provide hope for Dubai?
Updated 22 June 2021

Does Iceland tourism rebound provide hope for Dubai?

Does Iceland tourism rebound provide hope for Dubai?
  • Dubai is traditionally a popular destination for British holidaymakers
  • Britain is working on easing travel restrictions for fully vaccinated people to allow them to take a summer holiday

DUBAI: Iceland’s fourteen-fold increase in tourist arrivals in May compared to a year earlier highlights the extent of pent up demand for travel and could provide lessons for other emerging economies, according to research group Tellimer.

Similar to Dubai around the turn of the year, Iceland is currently demonstrating the pent-up demand for tourism, Tellimer said in a strategy note on Tuesday.
“I can attest to the unpleasant experience of spending 11 nights in a UK government quarantine hotel. I traveled from the UAE, which is a “red list” country despite doing a much better job of managing Covid than many on the UK’s “amber list,” and despite being personally very fortunate, by global standards, to have two doses of the Pfizer vaccine by virtue of being a Dubai resident,” said report author Hasnain Mailk. “If I had more time the route I might have taken would have been to spend ten days in Iceland, which is on the UK’s ‘green list.’”
Proof of vaccine means tourists can enter Iceland, take a free PCR test on arrival, and start their holiday with minimum fuss.
“Iceland, like other tourism destinations, is doing whatever it takes to re-open, but, of course, the resumption of tourism also requires a cooperative, competent, and unbiased policy from the country of a visitor’s origin or ultimate destination,” said Malik. “In the last two months, Iceland is providing an example of how vast the pent-up demand is for international tourism. It follows a similar experience in Dubai around the turn of the year. It remains to be seen whether there is a similar spike in infections as seen in Dubai (which subsequently moderated).”
Dubai, which has been urging UK authorities to ease travel restrictions to the emirate, is traditionally a popular destination for British holidaymakers.
Britain is working on easing travel restrictions for fully vaccinated people to allow them to take a summer holiday, UK Health Secretary Matt Hancock said on Tuesday. However the plans are not yet finalized.