2010 TO BE DIFFICULT YEAR FOR GULF BANKS, SAYS S&P REPORT

By Abdul Muin Majid

DUBAI, Feb 23 (Bernama) -- Standard & Poor's Ratings Services believes
that 2010 will be another difficult year for Gulf banks, as they continue to
clean up their loan books, an effort that will weigh on their financial
performance.

In a newly-published report, "The Economic Slowdown Reveals A Growing
Divergence In Credit Quality Among Gulf Banks", it said the global economic
slowdown and financial crisis had put the Gulf banking sector to the
test over the past 18 months.

Standard & Poor's said it had taken dozens of negative rating actions in
the sector throughout 2009, largely reflecting the consequences of the
unfavourable economic conditions on profitability and asset quality, especially
for banks in Kuwait and Dubai.

To date, about one-third of its 30 ratings on banks in the Gulf Cooperation
Council (GCC), comprising Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab
Emirates and Oman, have a negative outlook.

However, the outlook on most Saudi banks and for all Qatari banks remains
stable, the ratings agency said.

"We see a growing disparity in credit quality among banks in the Gulf,
between the stronger Saudi and Qatari banks on one hand and the relatively
weaker Dubai, Kuwaiti, and Bahraini investment banks on the other," its credit
analyst, Mohamed Damak said.

Standard & Poor's said it remained cautiously optimistic that economic
conditions would improve but did not exclude further negative rating actions in
the short term.

"The financial standing of Gulf banks as a group remains under pressure
despite recent signs of recovery in their respective national economies.

"Lower business volumes, asset quality deterioration and subsequent
provisioning needs as well as pressure on liquidity, appear to be affecting
the credit worthiness of Gulf banks to differing degrees," it stated.

It was also of the view that Saudi and Qatari banks were displaying strong
resilience to the deterioration of their operating environment.

It further said that the announcement by the government of Dubai of a
restructuring of Dubai World (DW), including a requested standstill on all
loans to it and real estate subsidiary Nakheel, had exacerbated the problems of
banks based in the emirate.
-- BERNAMA