AlembicHC said it expected banks in the Middle East and North Africa (MENA) region to remain resilient despite a negative impact from a potentially severe recession in Europe. A recession in Europe could affect the banks through oil price drops, trade flows, tourism, and impact on funding markets, the brokerage said.
AlembicHC said oil prices will remain critical for Gulf Cooperation Council countries to weather any potential impact. “As long as oil prices stay over $65 per barrel, we do not expect a reduction in government spending and investment plans,” analysts led by Jaap Meijer wrote in a client note. US crude oil was trading at $82 a barrel on Thursday.
“Oil prices have not come down much, banks are not likely to be affected by tighter funding markets, and funding markets have continued to function smoothly so far,” the analysts said.
Also, MENA markets have strong domestic investment sources, they said.
The analysts said lenders in Qatar, especially the Qatar National Bank SAQ and Commercial Bank of Qatar , are well positioned to benefit from the country’s long-term investment plans.
They also highlighted Qatar’s strong loan growth, fiscal surplus and its government’s ability to substantially raise public sector salaries.
Overall, banks in the MENA region still have strong fundamentals, are much better capitalized, much more liquid than their peers in developed markets, and also enjoy accelerating growth, the analysts said. They cited National Bank of Abu Dhabi as the best positioned in the United Arab Emirates.
The analysts were less positive on Saudi Arabia banks as they no longer expect an expansion in interest margins until the middle of 2013.