Economics
Reality Check for Saudi Banks
- Nine of 12 Saudi banks reported 1Q profit that beat estimates
- Bad loan provision, cost of funding seen rising amid oil slump
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For anyone betting Saudi Arabia’s banks are entering a resurgent phase after their earnings crushed analyst estimates in the first quarter, here’s a reality check.
Borrowing costs in the kingdom have risen to the highest in seven years, bad loans are forecast to jump after an increase in lending to companies hurt by payment delays, and economic growth is poised to slow by more than half this year. Little wonder, then, that analysts have turned the most skeptical since April 2015 on the outlook for Saudi banks, cutting their earnings projections for four successive months.