By Staff Writer
Standard & Poor’s Ratings Services took negative rating actions on eight Saudi banks, citing increased economic risks as the main reason.
The ratings agency, which has recently lowered the Kingdom’s ratings to ‘A+/A-1’, said the sharp drop in oil prices and the resulting negative swing in Saudi Arabia’s fiscal balance “will weaken operating conditions in the Saudi banking sector.”
S&P further expects lower business volumes, higher cost of risk, weaker profitability, and slower growth in deposits for Saudi banks.
“We view the trends for both economic and industry risks for Saudi banks as negative, versus stable previously,” S&P added.
The Saudi banks which S&P took negative ratings action against, are:
The ratings agency also expects Saudi banks’ asset quality and cost of risk to suffer as they “will be under pressure.”
It expects “limited lending opportunities for the banks,” given the government’s announced plans to postpone some investments.
But going forward, S&P thinks “Saudi banks will continue to exhibit good financial profiles, but their profitability could weaken slightly.”
It further reiterated its previous remarks with regard to an anticipated deterioration in Saudi Arabia’s fiscal balance following the sharp drop in oil prices.