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Thursday, November 30, 2023

Rising Oil Prices to Boost GCC Islamic Banks’ Assets

Rising oil prices and ambitious diversification efforts in the GCC nations are expected to sustain robust business activity among Islamic banks in the coming 12-18 months. Moody’s analysts predict that these banks will outperform their conventional counterparts in terms of profitability, driven by favorable margins.

The region’s economic growth, supported by high oil prices, diversification initiatives, and business confidence, will maintain stable asset quality. Strong capital and liquidity positions will enable GCC Islamic banks to meet the growing demand for Islamic financial services.

The global Islamic finance industry is poised to surpass $3.0 trillion, with the GCC playing a significant role. Saudi Arabia will lead in market penetration, and the focus on retail financing will support asset quality.

Moderate inflation levels in the region will help mitigate asset risks. Moody’s expects GCC Islamic banks to maintain a net profit margin advantage over conventional banks, with solid returns on assets and ample capital and liquidity to facilitate growth.

These banks have resilient capital positions, well above regulatory requirements, and robust loss reserves.

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