Economic recovery spurring solid growth for Gulf banks

Gulf banks have shown healthy earnings growth over the last eighteen months despite historically low interest rates, a new report has said.
The report, 'Economic Recovery Spurs Solid Growth For Gulf Banks', prepared by Standard & Poor's Ratings Services said banks in Gulf Cooperation Council (GCC) countries have experienced lower net interest margins, but improving asset quality and falling credit losses.
"We believe declining credit losses will continue to support GCC banks' earnings throughout 2014, although we expect this effect to be less visible in 2015," the report said.
"Prospects for economic growth in the Gulf region remain healthy for the next few years," said Standard & Poor's analyst Timucin Engin.

"We expect most Gulf banks to continue to benefit from robust corporate activity and consumer consumption over the next 18-24 months. The many infrastructure projects planned in the Gulf should translate into sustained streams of corporate lending," Engin said.
Over the past three years, strong liquidity flows into the Gulf's deposit markets have supported the region's banks - which traditionally rely on local deposits for the bulk of their funding - and we expect this trend to continue, the report said.
"Our rating actions in 2014 have largely reflected the generally positive backdrop in the Gulf region, and our rating outlooks largely reflect the ongoing recovery in the GCC banking system," the report added.