Mubasher: The outlook for banks in the Gulf Cooperation Council (GCC) member countries remains stable in 2020, underpinned by solid economic growth, strong capital buffers and substantial liquidity, according to Moody's Investors Service.

“Government spending programs will push average non-hydrocarbon gross domestic product (GDP) growth to 2.6% in 2020, providing favourable operating conditions for the region's banks,” said Nitish Bhojnagarwala, Vice President Senior Credit Officer at Moody's.

Moreover, the report noted that declining interest rates will start to pressure banks' net interest margins but margins will remain strong compared with global peers.

The ratings agency further noted in a report on Monday that the outlook is stable for all GCC banking systems, except Oman, where it maintains a negative outlook for the Omani banking system, expecting asset quality to weaken on the back of lower crude oil prices that have dented public expenditure and constrained government finances, thus limiting banks' access to funding and liquidity.

“Loan performance will weaken modestly but will remain solid. New problem loans will form primarily in the slowing construction and real-estate sector.”

Moody's also expects non-performing loans (NPL) to stand at a moderate 3.5% of total loans by the end of 2020, from an estimated 3.3% in 2019.