Saudi banks contain the effects of “Corona”

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Tariq Khaled / Anatolia

The credit rating agency, Fitch, stated, on Thursday, that banks operating in the Saudi market contained the effects that the Corona pandemic caused on the banking sector in the country.

In its report, the agency attributed this to a group of factors, most notably the gradual recovery of economic activity, supported by the rise in oil prices, and the improvement of the non-oil sector, which eased pressures on the sector’s operating environment.

The Saudi economy returned to growth in the second quarter by 1.8 percent for the first time since the pandemic, mainly supported by the non-oil sector.

The agency stated that the deterioration in asset quality and profitability was limited by government support measures and interest-free deposits, in addition to the strong growth of loans in 2020 and the first half of this year (14.9 percent and 19 percent, respectively).

The Saudi banking sector is distinguished from the rest of the world’s banks, as about three quarters of deposits with banks do not pay interest on them for legitimate reasons.

According to the agency, the delay in recognizing doubtful loans remains one of the main risks, but it believes that the impact on the quality of the sector’s assets and public financial files will be contained.

Saudi Arabia has 13 national banks licensed to operate in the country, including two digital banks, in addition to 19 branches of foreign banks.

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