Stable Outlook for GCC Islamic Banks in 2021 as Modest Economic Recovery Anticipated: Fitch Ratings

Reflecting a modest economic recovery in 2021, Fitch Ratings (Fitch) expects Islamic banks across the Gulf Cooperation Council (GCC) region to maintain adequate capital buffers and stable liquidity to manage risks. However, Fitch anticipates the pressure on asset quality and earnings to continue.

Fitch maintains a Stable Outlook on all rated Islamic banks within the GCC (with the exception of Saudi Arabia) based on the sovereign’s ability to provide support to the domestic Islamic banks when required.

Saudi Arabia is the only GCC nation with a Negative Outlook, reflecting continued weakness in the country’s external and fiscal balance sheets, which has been further impacted due to COVID-19 and lower oil prices.

According to Fitch, mergers and acq...