Moody's Investors Service maintained its 'stable' outlook on Saudi Arabia's banking system for the next 12 to 18 months, due to higher public spending, the stabilization of problem loans, modest credit growth, as well as robust profitability. It indicated that the planned increase in government spending this year will support non-oil real GDP growth, which, in turn, would  stimulate bank lending. As such, it forecast lending to increase by 4% to 5% in 2019 following subdued activity in 2018, supported by a pick-up in loan demand from the private sector, merger and acquisition activity in the corporate sector, and a recovery in the construction sector and in consumer spending. Further, the agency expected the banks' non-performing loans ratio to stabilize at 2% to 2.25% in the next 12 to 18 months, as the government continues its fiscal expansion. But it noted that loan performance in the construction and commerce sectors will continue to face pressure due to structural reforms and the ongoing impact of the recent economic downturn. Still, it considered that the banks' very high levels of loan-loss provisions provide a solid buffer against these pressures. Further, it expected the banks' capital ratios to remain high amid modest credit growth and resilient profitability. It forecast the profitability of Saudi banks to remain stable in the next 12 to 18 months, supported by higher interest rates, low provisioning costs and sound cost controls, which will be offset by pressure on funding costs amid competition for large depositors. 
Source: Moody's Investors Service