Close Menu
The Oasis Report
  • Home
  • Analysis
  • Business
  • Economy
  • Finance
  • Investor
  • Market
  • Opinion
  • Saudi Arabia
  • Startups
What's Hot

Trump heads to Middle East with oil, arms, nuclear ambitions in focus

May 9, 2025

Nestlé Academy hosts an exceptional alumni gathering in Jeddah

May 9, 2025

ACWA Power Reports 44% Surge in Q1 Profit to $113.8 Million

May 9, 2025
Facebook X (Twitter) Instagram
Trending
  • Trump heads to Middle East with oil, arms, nuclear ambitions in focus
  • Nestlé Academy hosts an exceptional alumni gathering in Jeddah
  • ACWA Power Reports 44% Surge in Q1 Profit to $113.8 Million
  • On the vain hunt for black swans in dynamic Dubai
  • Dollar Eyes Weekly Rise into US-China Trade Talks 
  • UK, Switzerland Sign Agreement Aimed at Direct Rail Link 
  • Truce in Yemen offers reprieve but exposes shipping volatility
  • China’s First Four-Month Steel Exports at Record High Despite Tariff Turmoil 
  • Home
  • About Us
  • Advertise With Us
  • Contact Us
  • DMCA
  • Privacy Policy
  • Terms & Conditions
Facebook X (Twitter) Instagram
The Oasis ReportThe Oasis Report
Friday, May 9
  • Home
  • Analysis
  • Business
  • Economy
  • Finance
  • Investor
  • Market
  • Opinion
  • Saudi Arabia
  • Startups
The Oasis Report
Home » GCC banks unlikely to escape US tariff impact

GCC banks unlikely to escape US tariff impact

adminBy adminApril 18, 2025 Market No Comments4 Mins Read
Share
Facebook Twitter LinkedIn Pinterest Email


Non-performing loans may increase

Qatar most vulnerable

Likely to hit profits, not solvency

US President Donald Trump’s imposition of additional import tariffs will trouble GCC banks, despite the bloc’s meagre non-oil exports to the United States, according to analysts.

Trump’s tariff strategy, targeted principally at China but worldwide in scope, has roiled global equity markets, sent the dollar tumbling and exacerbated oil price declines.

As such, “the indirect effects of the intensifying trade tensions could be significant”, an S&P Global Ratings report has warned.

Brent crude is down around 9 percent this month at almost $68 a barrel as of April 17. This month, it plunged below $60 for the first time since early 2021.

“A significant reduction in oil prices could impinge on (Gulf) government spending and economic sentiment and lead to an increase in (bank sector) non-performing loans (NPL),” the S&P report stated. “The most imminent threats are market volatility and investor risk aversion.”

GCC banks appear well positioned to deal with the dangers emerging from escalating tariffs. Their investment portfolios account for 20-25 percent of their assets, S&P estimated. Most of these investments comprise “high quality” bonds and sukuk, with riskier investments forming a much smaller component, the ratings agency wrote.

“Losses are unlikely to materialise unless banks need to liquidate some investments to deal with capital outflows, which we don’t expect to happen,” the report stated.

Capital outflows refer to customers withdrawing money from accounts. Deposits are the main means through which banks fund their lending.

In terms of potential capital outflows, Qatar is the most vulnerable within the six-country GCC, as its banks have the highest percentage of non-resident deposits, said Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes in Cairo.

As of February, non-resident deposits at Qatari banks amounted to QAR201.5 billion ($55.4 billion), or 19.1 percent of the sector’s total deposits.

A Saudi Arabia-led embargo on Qatar from 2017 to 2021 led the kingdom and its ally the UAE to withdraw deposits from the country’s banks. In response, Qatar’s sovereign wealth fund repatriated money from abroad and deposited sizeable amounts with domestic banks to ease the sector’s funding constraints.

“If there were renewed capital outflows, the fund would do similar again, so although in theory Qatar appears vulnerable to outflows these would be manageable thanks to the country’s strong balance sheet,” said Abu Basha.

In the UAE, non-resident deposits represent 7 percent of domestic banks’ total deposits, according to central bank data, making it the second-most reliant on such deposits in the Gulf.

“UAE banks have excellent liquidity, so a reduction in non-resident deposits wouldn’t be a big issue,” Abu Basha said. 

Saudi Arabian banks appear comfortable, but “if they are unable to continue to tap the capital markets, their capacity to continue financing Vision 2030 projects might diminish”, S&P wrote.

The average non-performing loan ratio among the Gulf’s 45 biggest banks was 2.9 percent in 2024. Lenders have set aside money – known as provisions – amounting to 150 percent of the value of these NPLs.

S&P tested two theoretical scenarios to investigate the probable impact of increased loan defaults. In the first, banks’ NPL ratios rose to at least 5 percent. This would result in 16 of the top 45 banks making net annual losses totalling $5 billion this year.

In a second, graver scenario, in which NPLs rose to at least 7 percent, this could cause 26 banks to suffer combined losses of $30 billion – less than half the sector’s aggregate profits of $60 billion last year.

“This means that even in our worst-case scenario, we still expect the shock to affect banks’ profitability rather than their solvency,” S&P said. 

Register now: It’s easy and free

AGBI registered members can access even more of our unique analysis and perspective on business and economics in the Middle East.

Why sign uP

Exclusive weekly email from our editor-in-chief

Personalised weekly emails for your preferred industry sectors

Read and download our insight packed white papers

Access to our mobile app

Prioritised access to live events

Already registered? Sign in

I’ll register later



Source link

admin
  • Website

Keep Reading

On the vain hunt for black swans in dynamic Dubai

US moves to fast-track deals with Middle East nations

Morocco aims to reclaim its emerging market status

UAE and Saudi Arabia diverge on US treasuries

Taking on the almighty dollar

Emirates Group delivers record annual profit

Add A Comment
Leave A Reply Cancel Reply

Editors Picks

On the vain hunt for black swans in dynamic Dubai

May 9, 2025

US moves to fast-track deals with Middle East nations

May 9, 2025

Morocco aims to reclaim its emerging market status

May 8, 2025

UAE and Saudi Arabia diverge on US treasuries

May 8, 2025
Latest Posts

Trump heads to Middle East with oil, arms, nuclear ambitions in focus

May 9, 2025

Saudi fund deepens investment in women’s professional golf

May 7, 2025

Trump administration to announce U.S. will call Persian Gulf the Arabian Gulf

May 7, 2025

Subscribe to News

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

Welcome to The Oasis Report, your trusted source for the latest news and insights on startups, markets, business, economy, and finance in Saudi Arabia. We are dedicated to providing timely, accurate, and in-depth coverage of the ever-evolving financial and business landscape in the region.

Facebook X (Twitter) Instagram Pinterest YouTube

Subscribe to Updates

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

Facebook X (Twitter) Instagram Pinterest
  • Home
  • About Us
  • Advertise With Us
  • Contact Us
  • DMCA
  • Privacy Policy
  • Terms & Conditions

© 2025 theoasisreport. Designed by TeraSolutions.io

Type above and press Enter to search. Press Esc to cancel.