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Middle EastApril 1 2016

Saudi Arabia's banks braced for a slowdown

Well capitalised, with low non-performing loan ratios and strategically diverse business lines, Saudi Arabia's banks have weathered the country's economic slowdown well. Now, with the economic backdrop unlikely to change in their favour, these lenders are looking at ways to remain profitable in the long term.
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The good news for Saudi Arabia’s banks is that despite the fall in oil prices their growth story looks set to continue. With strong capitalisation and liquidity levels, as well as a supportive government budget for 2016, the country’s lenders are in a good position to maintain their positive momentum.

But the cooling economic climate means that this growth will be slower than in previous years. Indeed, according to most system-wide indicators, the past 12 months have illuminated some of the challenges facing the country’s lenders in this new environment. Corporate credit growth for 2015 slowed to 10.8% from 12.8% in 2014, while consumer credit growth fell to 4.5% from 8.8% over the same period, according to local investment firm Jadwa Investment.

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