The credit rating outlook on the Saudi Arabian banking system remained ‘stable' due to the country's benign operating environment, Moody's Investors Service said in a report Monday. The expected decline in problem loan levels as well as Saudi banks' supportive capital, profitability and liquidity attributes also contributed to the ‘stable' outlook, Moody's said. Saudi banking system is set to be boosted in 2012 by strong economic growth, Moody's expects. Moody's said the outlook for Saudi Arabia's banking system in 2012 is stable due in part to high capital ratios and an expected decline in problem loan levels which will help boost profitability. Banks in the world's top oil exporter are also set to benefit from strong economic growth and more liquidity underpinned by government spending, it said in a report on Monday. However, the rating agency noted that these positive factors were counterbalanced by structural weaknesses including high loan and deposit concentrations, the opacity of family conglomerates and a vulnerability to a sustained drop in oil prices. The rating agency said it believes that the performance of the Saudi Arabian banking system will be supported by the expansion of non-oil private sector GDP. The banks' performance will also benefit from continued high levels of government spending and resilience to oil price fluctuations going forward as a result of low government debt levels and a large accumulation of reserves, the agency said. Meanwhile, the non-oil private sector in Saudi Arabia expanded at faster rate in November, data from a survey by Markit Economics, the Saudi British Bank and HSBC Bank showed Monday. The purchasing managers index (PMI) for the non-oil private sector increased to 58.1 in November from 56.7 in October. A PMI reading above 50 indicates expansion in the sector, while one below suggests decline. The latest reading, however, remained below its long-run average. New orders received by firms in the non-oil private sector increased at a faster pace during the month, reflecting favorable economic conditions, good market demand and competitive pricing. Production and staffing levels in the sector also increased at faster rates in November, while backlogs of work accumulated to the greatest extent since May. At the same time, price pressures intensified in the non-oil private sector during the month.
