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Moody’s lifts Saudi banking system outlook as funding pressures ease

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Credit rating agency Moody’s Investors Service has raised its outlook for Saudi Arabia’s banking system to “stable” from “negative”, in a fresh sign that global investor confidence in the kingdom is recovering after plunging due to low oil prices.

“Despite low oil prices, which we expect to fluctuate between $40 and $60 a barrel over the next 18 months, and cuts in oil production, the Saudi economy will gradually recover, supported by government spending,” Moody’s vice-president Olivier Panis said in a statement on Wednesday.

“As a result, Saudi banks’ liquidity and funding conditions will improve. Although profitability and loan performance will continue to soften, Saudi banks will maintain robust capital and loss-absorption buffers compared with regional and international peers over the outlook horizon.”