News – Middle East: The agency “Standard & Poor’s Global” credit ratings said, Thursday, that indicators of asset quality of UAE banks will be affected by the decline in economic conditions, the continuation of the correction in the real estate sector and the negative repercussions resulting from the Covid-19 pandemic. 

 In details, the agency stated, in a report, that the regulatory precautionary measures taken by the concerned authorities will delay the results of these repercussions until 2021. 

The agency expected the economy in the UAE to shrink by 8.5% in 2020, followed by a modest recovery in 2021. The agency added that the high cost of risks and lower margins will lead to a decrease in the profitability of these banks in the period between 2020-2021, expecting most UAE banks to remain profitable. 

The report stated that operating conditions lead to poor performance of banks. He continued, “Lending growth will remain weak, because most banks will focus on dealing with the effects of operational conditions on the quality of their assets, as regulators will gradually stop the precautionary measures, they have taken to confront the pandemic.” 

Source: Agencies