S&P Global

Pandemic may force GCC banks to cut dividends, drive future M&A

Banks in the Arabian Gulf could be forced to scrap 2020 dividends as profits plunge in 2020 due to the coronavirus pandemic. The region's lenders are unlikely to require additional capital should loan defaults soar, despite facing headwinds related to the impact of COVID-19 and lower oil prices. According to S&P Global Ratings, the 23 banks in the Gulf Cooperation Council (GCC) have assets totaling $1.5 trillion at 2019-end and can absorb up to $36 billion in extra provisions before their capital bases start to erode. S&P sees that a significant deterioration in the finances of some banks could spur a second wave of consolidation among Gulf lenders. However, bank analysts are more skeptical, citing a lack of plausible potential takeover targets in Gulf countries except for the UAE, which is still overbanked.

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