Operating Environment; Strong growth support Saudi Islamic banks

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Saudi Islamic banks’ standalone credit profiles will be supported in 2022 by a favourable operating environment with high oil prices, rising interest rates and strong credit growth, Fitch Ratings says in a new report.

Strong credit growth will also put some pressure on capital and funding needs, with increasing recourse to market funding. We do not expect M&A involving Islamic banks in the near future. Saudi Arabia has the largest proportion of Islamic banks’ financing (84%) of any country that allows conventional banks to operate alongside Islamic banks.

We expect Saudi Arabia to enhance its sharia governance framework for Islamic finance, as set out in the kingdom’s Financial Sector Development Programme (part of its Vision 2030), which could result in a more consistent approach to Islamic financing and products, and in better education, research and confidence.—Zawya News