BANKING systems across the GCC face limited immediate credit risks following the recent regional escalations on February 28, according to a new report by Fitch Ratings.
The agency noted that GCC bank ratings remain primarily driven by expectations of sovereign support. Fitch believes regional sovereign ratings possess sufficient ‘headroom’ to withstand a short-term conflict, supported by substantial assets that act as a buffer against hydrocarbon revenue disruptions.
Rated GCC banks maintain sound financial metrics, ample liquidity, and solid capital buffers.
Risks to credit profiles are expected to be contained if the conflict lasts under a month, as currently anticipated.
Most GCC states have the fiscal capacity to bypass short-term shocks, though lasting damage to energy infrastructure remains a primary risk.
Fitch highlighted that the strength of non-oil growth and general regional confidence are the critical areas to watch. While the agency’s pre-conflict baseline for 2026 assumed robust diversification projects, the recent attacks introduce new variables.
“Non-oil activity will be affected as regional air travel has been suspended and risk perceptions could impact tourism,” the report stated.
However, under the current baseline – where energy infrastructure remains intact – the impact on loan growth, asset quality, and profitability is expected to be temporary and limited.
The report identified funding and liquidity as a ‘rating strength’ for most of the region, with the exception of Qatar and, to a lesser extent, Saudi Arabia.
While overseas debt issuance may become more challenging, forcing some banks towards more expensive domestic markets, Fitch asserts that solid capital ratios will likely prevent any significant shifts in credit profiles.
The ratings agency warned that more serious effects could emerge if the conflict causes ‘reputational damage’ to the region’s status as a global business haven. Potential outflows of expatriates could pressure housing markets and asset quality, though accelerated government spending post-conflict could conversely stimulate loan growth.
avinash@gdnmedia.bh
&uuid=(email))