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Gulf banks to face a drop in net profit: Standard & Poor’s

Net income growth expected “to decline below ten percent in 2015 and potentially slow further in 2016”

Banks in the Gulf region will face a drop in net profit amidst the decline in public spending caused by the fall of crude prices, announces Standard & Poor’s Agency for ratings services.

The net revenue growth for banks dropped to four per cent in the second quarter of the year, compared with seven per cent in the first quarter and ten per cent during the previous three quarters, according to a report distributed by the agency on the results of 26 large banks based in the Gulf.

“We expect Gulf banks’ net income growth to decline below ten percent in 2015 and potentially slow further in 2016,” the ratings agency said.

The agency said: The “good” earnings in the first half were due in part to declining credit losses and a reduction in provisions or funds set aside for doubtful loans, Saudi based Alsharq.net reports.

The drop in crude prices by more than 50 per cent since June 2014 led to a decline in government spending, which the private sector depends on heavily to spur economic activity.