Fitch Ratings Predicts UAE Banks’ Credit Profiles to Weaken Amidst COVID-19 and Lower Oil Prices

Fitch Ratings (Fitch) has predicted the standalone credit profiles of the banks in the United Arab Emirates (UAE) to weaken in 2020 as a result of the COVID-19 pandemic and lower oil prices, although the Central Bank of the UAE has unveiled timely support programs.

The ratings agency stated that banks' profitability will be compromised as a result of lower interest rates, lower non-interest income driven by subdued business volumes and higher impairment charges on financing facilities. Meanwhile, Fitch expects asset quality of UAE banks to also weaken, since not all borrowers will be able to deal with the impact of the expected economic downturn.

However, Fitch anticipates that the r...