Bahrain’s banking outlook ‘is stable’

MANAMA: Moody’s has changed the outlook for Bahrain’s banking system to stable from negative on slightly higher economic growth as a $10 billion financial support package bolsters government finances.

Bahraini banks’ funding and liquidity conditions are expected to remain healthy, said Moody’s Investors Service in a report yesterday.

“The economy will see slightly higher growth, while the aid package from the GCC will help replenish foreign currency reserves and help stabilise the economy,” said Ashraf Madani, vice-president and senior analyst at Moody’s.

“We expect Bahraini banks to maintain strong capital, as solid profits will generate sufficient capital to balance rising risk-weighted assets caused by loan growth. And their profitability will remain sound, fuelled by rising lending volumes and stable profit margins.”

Bahrain’s real growth in gross domestic product will rise to 2.1 per cent in 2019 from 1.8pc in 2018.

Government fiscal reforms will take a toll on the large non-oil economy but the impact will be softened by accelerated off-budget spending on large infrastructure projects, also financed by the GCC.

This will drive continued recovery in the construction and real estate sectors. Moody’s expects domestic credit growth to slow to 4pc-5pc from a high 9pc in 2018.

Moody’s expects Bahraini banks’ funding and liquidity conditions will remain healthy. They hold ample liquid assets at 34pc of total tangible assets, a credit strength. However, large volumes of foreign-currency funding and sizeable depositor concentrations are vulnerabilities for the system.


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