Muscat – The profitability of GCC banks stabilised in the first half of this year and will continue to do so in the second half of 2021, according to S&P Global Ratings.

‘Overall, GCC banks’ profitability stabilised in the first half 2021 due to still-high cost of risk and stable interest margins,’ S&P said in a report released on Monday. ‘In the absence of further shocks – pandemic or non-pandemic related – we expect this to continue in second-half 2021, aided by careful cost control,’ the ratings agency said.

S&P expects that the GCC banks’ capitalisation will remain supportive of their creditworthiness.

According to S&P, the COVID-19 pandemic and last year’s oil price crash did not affect all GCC banking systems in the same way, highlighting the resilience of some and the inherent weaknesses of others.

‘Among the four country banking sectors we profiled, we believe the most vulnerable is the UAE, where the pandemic disrupted important economic sectors such as the hospitality, trade, and real estate sector,’ the agency said.

‘However, this was largely mitigated by the government’s Targeted Economic Support Scheme, which offered breathing room to corporates hit by the pandemic and reduced costs for banks by providing free funding.’

Similarly, in Qatar the state’s footprint in the economy and support measures helped reduce COVID-19’s effects on the banking system, S&P said.

S&P considers the Saudi Arabian banking system the least vulnerable in the GCC in the current environment.