S&P Ratings analysts say that non-performing loan (NPL) ratios of GCC banks are expected to surge in the next 1-2 years as central banks gradually withdraw forbearance measures and the pandemic’s impact on weaker businesses are revealed. The analysts expect NPLs to rise, not exceeding 5-6%, vs. 3.8% as of June 2021. Meanwhile, they also expect GCC economies to expand at 1.8% in 2021 and 4% in 2022 facilitated by increased credit growth, with Saudi being an exception, ‘with continuing strong lending growth, driven primarily by mortgages and to some extent the implementation of Vision 2030 investments’. They expect lending growth to expand in H2 this year after it was muted at 0.6% in H1 and profitability is expected to stabilize in 2021-22. Overall, S&P believes GCC banks have shown resilience to the Covid-19-related economic shock and last year’s sharp decline in oil prices
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