Riyadh - Mubasher: Saudi Arabian banks have seen improved probability during 2019, despite the pressure on asset quality, amid lower government spending and weaker consumer confidence, according to a report released on Thursday by Fitch Ratings.

Liquidity and funding are stable, while the growth of deposit and loan remained steady, with sold capital ratios, Fitch maintained. 

In 2019, Saudi banks’ may achieve a mid-single digits growth in loans, the report added, noting that loan restructuring was likely.

“Asset-quality was under pressure in 2018 particularly in contracting, retailers and retail/wholesale trade. Loan impairment charges (LICs) to average gross loans and write-off ratios declined but remained high.”

Last year, operating profit and risk-weighted assets improved, supported by a 3.54% increase in net interest margins (NIM), Fitch’s data showed.

The report showed that funding pressures eased in 2018, fueled by higher oil prices and deposits, due to the increase in liquidity. 

The average gross loans-to-deposits ratio stabilised at 85%, while local deposits made up over 90% of total funding, which is the highest level in the GCC.

“Foreign funding is below 5% of total funding. Retail deposits and non-interest bearing CASA form a much bigger portion of funding than in other GCC countries but high concentrations remain. The average liquidity coverage ratio is over 200% and banks are well-positioned to anticipate funding maturities.”

On Thursday, Fitch Ratings affirmed the Saudi Investment Bank's (SAIB) Long-Term Issuer Default Rating (IDR) at “BBB+” with a stable outlook.

Fitch also affirmed Gulf International Bank - Saudi Arabia's (GIB SA) Long-Term Issuer Default Rating (IDR) at "BBB+" with a stable outlook.