2016 Outlook: Gulf Cooperation Council Banks

...Negative Rating Outlook: Fitch Ratings has a Negative Outlook on 16% of its rated banks in the Gulf Cooperation Council (GCC); all others are on Stable Outlook. The Negative Outlooks are largely driven by sustained low oil prices, which weaken sovereign ability to provide support and rationalise government spending, ultimately affecting banks' financial metrics. This does not in any way reflect lower sovereign propensity to provide support. Negative Sector Outlook: The sector outlook is negative, largely due to pressure on Saudi, Omani and Bahraini banks, where the operating environment is now acting as a cap on the banks with the highest Viability Ratings (VRs). Banks in other GCC countries are not immune, with mounting liquidity and earnings pressure. Fitch believes the positive trend in Kuwait needs to be accelerated and sustained to feed through into banks' VRs. Low Oil Price Forecast: Oil generates about 70% of GDP directly and indirectly in the GCC. Fitch expects Brent Crude to average...

Outlook