Moody’s Investors Service has monitored a surplus in the number of Gulf banks relative to the population, as the number of banks exceeds about 160 banks that provide services to about 58 million citizens and residents, 31 of them in Saudi Arabia, at a rate of 19.4%, at a rate of one bank per 1.07 million people.Low oil prices
Moody’s said, yesterday, Tuesday, that the new Corona crisis and low oil prices will accelerate the pace of mergers and acquisitions of banks in the Gulf Cooperation Council countries, as they seek to reduce costs. She stated in a research report that banks are now facing greater cost adjustments, with lower oil prices, and banks are seeking to cope with the pressure of declining revenues.
She added that operating efficiency is the key to maintaining profitability, as the current crisis will have an impact on banks’ profitability through slowing credit growth and increasing allocations for bad loans. The agency expects that the recovery in operating conditions will take longer, and market conditions warn of re-defining the basic requirements for keeping banks competitive, and the difficult background will stimulate limited expansion opportunities in the balance sheet of GCC banks, severely reducing profits, and calling for amendments. Significant cost increases the incentives for banks to join forces.
Moody’s monitored that there is a surplus in the number of Gulf banks relative to the population, as the number of banks exceeds about 160 banks that provide services to about 58 million citizens and residents, and the UAE came in the lead with about 48 banks, then Saudi Arabia 19.4 and Bahrain with the same number of banks by 31, and Kuwait 22 banks Oman has 18 banks.
The agency stated that Gulf banks carry out most of the lending operations outside the dominant oil sector, while growth in non-oil sectors tends to be positively correlated with oil prices, because revenues from oil and gas production directly feed the governments of the region, and are the backbone of government spending that drives the rest of the economy.
Gulf banks are facing greater cost adjustments, as lower oil prices and the fallout from the Coronavirus constrict growth opportunities, severely impacting their profitability, and merger deals will be increasingly driven by purely financial considerations.
Moody’s said that despite the resumption of commercial activity, the region’s economy is still recovering from the negative effects of the Coronavirus and the resulting economic disruption.
She noted that the government packages include endurance measures that would temporarily alleviate the pressure on borrowers, and thus delay the banks ’recognition of poor credit quality, as these would not fully compensate them for some economic damage.
The number of Gulf banks is relative to the population
The UAE 48 banks with 7.06 million people
Saudi Arabia has 31 33.3 million people
Bahrain 31 1.66 million people
Kuwait 22 5.20 million people
Oman 18 3.53 million people
Qatar 10 2.6 million people
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