Gulf banks to avoid global turmoil, predicts ratings agency

27 March 2008
Most banks in the region are expected to avoid the current market turmoil and continue to post strong profits, according Standard & Poor’s (S&P), a rating agency.

Financial institutions in the region are benefiting from the “rosy environment in their home markets and carry limited exposure to US sub-prime and structured investment products,” says Mohamed Damak, credit analyst at S&P.

He did warn however that the large volumes of young loans on the balance sheets of banks posed an unknown risk in the event of an economic downturn in the region, especially given the degree of exposure to the real estate sector.

Despite the risks, Damak adds that if the economic conditions remain buoyant, banks in the region could have their ratings upgraded.

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