GCC banking profits could near pre-pandemic levels by 2022 finish

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Banking profits across the Gulf Cooperation Council (GCC) could near pre-pandemic levels by the end of this year, a report by an American credit rating agency said on Thursday.

The rebound in profitability across the four largest GCC banking systems – Saudi Arabia, the UAE, Qatar and Kuwait – is being spurred by high oil prices and interest rate hikes, S&P Global Ratings said.

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But the economic prosperity in the region could be short-lived with countries likely to be impacted by global events.

“GCC banks’ strong momentum so far in 2022 may not be enough to shield them from adverse developments in 2023,” S&P Global Ratings credit analyst Zeina Nasreddine said in a statement.

“Expected lower oil prices and potential recessions in the US and Europe next year may have knock-on effects for the region and its banks.”

S&P Global Ratings predicted global oil prices to average $85 per barrel in 2022, compared with $100 for the remainder of 2022, as well as a US recession, both of which could have a knock-on effect on GCC economies and banks.

In Europe, escalating geopolitical risks and high inflation could mean weaker economic growth, the report said.

“This would hurt global growth and pressure commodities prices, leading to knock-on effects for the GCC region and its banks,” it added.

Europe is currently suffering from a cost-of-living crisis, driven largely by the Russia-Ukraine war.

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