Standard & Poor’s cut the credit ratings of the eight Saudi Arabian banks that it covers, citing increased risks to the kingdom’s economy because of lower crude revenue.
“The sharp drop in oil prices and the resulting negative swing in Saudi Arabia’s fiscal balance will weaken operating conditions in the Saudi banking sector,” the ratings firm said Thursday in an e-mailed statement. “We expect lower business volumes, higher cost of risk, weaker profitability and slower growth in deposits.”
Saudi Arabia is forecast to post a fiscal deficit of 411 billion riyals ($110 billion) this year, or 17 percent of gross domestic product, according to Moody’s Investors Service. On Oct. 30, S&P lowered its ratings on the kingdom.
Banque Saudi Fransi, Samba Financial Group, Al Rajhi Bank and National Commercial Bank were among lenders affected by the decision.
Link to Statement:Link