RIYADH: Banks in Saudi Arabia and the UAE are anticipated to experience robust credit growth in 2025, fueled by elevated crude oil prices and the expansion of the non-oil economy, according to a recent analysis.
In its latest report, Fitch Ratings forecasted that banks in the Kingdom will see financing growth of approximately 12 percent in 2025, nearly double the Gulf Cooperation Council (GCC) regional average.
The US-based agency noted that corporate financing is expected to make up 65 to 70 percent of new lending among Saudi banks in 2025.
This analysis aligns with Moody’s projections from November, which suggested that Saudi Arabia’s Vision 2030 initiative, aimed at diversifying the economy, could boost the growth of the banking sector.
Fitch Ratings stated: “The operating environment for banks in the Kingdom is supported by high oil prices and government spending, which drive the country’s giga-projects and the Vision 2030 strategy, leading to strong non-oil GDP growth.”
It added: “Fitch Ratings predicts real non-oil GDP growth to average a robust 4.5 percent over 2024–2025, compared to 5 percent over 2022–2023. We anticipate the sector’s financial metrics to remain strong in 2025.”
The report highlighted that the gradual implementation of giga-projects will continue to attract banks’ interest, although the current share of giga-project-related financing is minimal for most rated banks.
However, the credit rating agency cautioned that the net foreign assets of banks in the Kingdom could remain negative in 2025 due to high-cost domestic term deposits and increased demand for foreign currencies.
Regionally, banks in the Middle East are expected to maintain strong profitability, solid liquidity, and adequate capital buffers in 2025, with stable asset quality.
In November, S&P Global reported that GCC banks are likely to sustain strong asset quality, profitability, and ample liquidity through 2025, supported by robust capitalization and well-managed balance sheets.
S&P Global warned that heightened geopolitical tensions and a sharp decline in oil prices could negatively impact the creditworthiness of financial institutions in the region.
In the UAE, banks are projected to benefit from favorable business and operating conditions in 2025, driven by high oil prices and increased economic activity.
Fitch noted that UAE banks could achieve loan growth of around 9 percent in 2025, surpassing the GCC average but slightly below Saudi Arabia’s growth rate.
“We expect UAE banks’ funding and liquidity to remain strong, with deposits continuing to grow in line with lending. Liquidity will be supported by large government deposits, driven by the sovereign’s solid net external assets position, strong fiscal metrics, and recurring hydrocarbon revenues,” Fitch added.
The report also highlighted the growth of the banking sector in Egypt, with general business and operating conditions expected to improve in 2025.
Fitch cited falling inflation, enhanced investor confidence, and healthy foreign currency liquidity as key factors that could strengthen Egypt’s banking sector.
In Bahrain, credit growth among banks is expected to be moderate, around 4.5 percent in 2025, compared to GCC peers.
Fitch predicted stable asset quality metrics for Bahraini banks in 2025, with lower lending rates easing pressures on corporate loan books, particularly in real estate and contracting.
In Kuwait, banking sector credit growth is expected to range between 5 and 6 percent in 2025, constrained by high interest rates and moderate real non-oil GDP growth.
Liquidity among Kuwaiti banks is anticipated to remain strong, supported by large and stable deposits from government-related entities and high oil prices.
Fitch highlighted Oman’s Vision 2040 program, which aims to diversify the economy and could create opportunities for banks, reducing reliance on government spending in the long term.
In Qatar, the business and operating environment for banks is expected to improve in 2025, with credit growth projected at 5.5 percent, below that of Saudi Arabia and the UAE.
In Jordan, banking market conditions are expected to remain challenging, with lending growth of 3.5 percent in 2025.
Fitch concluded: “The operating environment for banks in Jordan remains challenging due to subpar and structurally weak real GDP growth, high unemployment, and geopolitical risks, which negatively impact tourism and exports.”
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