Non-performing Loans In Kuwait Are Most Likely To Be Related To Commercial Real Estate

In the next 12-24 months, Standard & Poor's (S&P) forecasts a decline in the rate of non-performing loans in the local banking sector, with commercial real estate being the most likely source.

In the Gulf countries, the agency predicted that the profitability of banks would improve as risks were reduced and interest rates increased, noting that the Central Bank of Kuwait increased its discount rate by 0.25 percentage points in July and by the same amount in August, following the lead of the US Federal Reserve by raising interest rates in July.

In addition to more interest rate hikes this year, high oil prices contribute to banks' operating environment in a positive way.

As for Kuwait and Bahrain, the agency expected high oil prices to support the economic recovery in the two countries during 2022, which will in turn protect the quality and profitability of their banks.

In the second quarter of this year, five of the largest Gulf banks reported an increase in profitability, as central banks in the region raised interest rates.

According to Standard & Poor's Global Market Intelligence, First Abu Dhabi Bank, Emirates NBD, Saudi National Bank, Al Rajhi Corporation and Qatar National Bank recorded increases in net income on an annual basis.

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