Funding pressures to ease for Gulf banks in 2017: Moody’s

Funding conditions for the GCC banking sector will improve this year, driven by oil price stabilization, large international sovereign debt issuances, and lower credit growth, Moody's Investors Service said in a report on Wednesday.

“Price stabilization between $40 and $60 per barrel will improve oil revenues, supporting government and corporate deposits in the region's banking systems. International debt issuance will also support deposits,” the rating agency said.

Meanwhile, slower economic growth will subdue lending activity and reduce funding pressure for banks.

Banks in Oman and Qatar will benefit the most from easing funding conditions, followed by lenders in Saudi Arabia and the United Arab Emirates.

Funding pressures are expected to ease in Saudi Arabia after the kingdom paid nearly $28 billion to contractors by the end of 2016, said Mik Kabeya, analyst at Moody's.

Saudi banks will maintain high liquidity buffers going forward, he added.

Elsewhere in the region, funding conditions in the United Arab Emirates – where the loan-to-deposit ratio stood at 94 percent at June 2016 – are also likely to stabilize.

Bahraini and Kuwaiti banks, meanwhile, will continue to have the strongest funding and liquidity profiles in the region, Kabeya added.

Kuwait’s banking sector will remain deposit funded and well-cushioned by liquid assets, while Bahraini lenders will maintain one of the strongest funding and liquidity profiles in the region.