Currencies in Saudi Arabia and the UAE are pegged to the dollar, and the two countries usually follow interest-rate changes made by the US Federal Reserve.
Monday 24, June 2019
(Bloomberg) --Saudi Arabia and UAE-based lenders may have their annual revenue estimates cut by one or two percentage points for every 25 basis point decline in US interest rates.
Loans make up more than 70 per cent of Gulf banks’ earnings assets that are largely floating-rate corporate facilities and changes in interest rates have a huge impact on income from lending.
Edmond Christou, Bloomberg Analyst, said that the net interest margin at Emirates NBD, the UAE’s second-biggest bank, may fall by 10 to 12 basis points for every 25 basis points cut in rates, the most among the top four UAE lenders.
Additionally, the net interest margin at Dubai Islamic Bank and Saudi lenders such as Al Rajhi Bank and Riyad Bank may hold up better.