Saudi stimulus plan to boost growth
Riyadh, September 14, 2010
The Saudi government's stimulus program is likely to result in strong economic growth and robust corporate credit demand, benefiting the country's banking sector, said Goldman Sachs, which started coverage of six banks.
Last month, Saudi Arabia announced plans to build schools, hospitals, housing and other infrastructure projects as part of a five-year plan budgeted at nearly $375 billion.
'We believe Saudi banks are entering a virtuous banking cycle, underpinned by credit growth, asset mix improvement, low funding cost and falling loan losses,' Goldman said.
It started Samba Financial Group, Saudi British Bank, Banque Saudi Fransi and Arab National Bank with 'buy' ratings.
Corporate loan growth would also rebound on the back of lower government financing, Goldman said, adding that banks with substantial liquidity should benefit the most.
Relatively low consumer finance penetration and attractive demographics will result in robust retail loan growth for the banks, Goldman said. -Reuters