The Banking Executive Magazine - September 2023 Issue

High Oil Prices High oil prices and ambitious eco- nomic diversification agendas of the GCC countries will help Islamic banks across the region to sustain strong business activity over the next 12-18 months, with their prof- itability continuing to exceed that of their conventional peers, analysts at Moody’s said. ‘’We expect the profitability of Shariah-compliant banks operating in the region to continue to exceed that of their conventional peers in 2024 due to margin advantage. Continued economic growth will keep GCC Islamic banks' asset quality stable while strong capital and liquidity will enable them to capitalise on the growing demand for Islamic financial services in the region,’’ said Badis Shubailat, ana- lyst at Moody’s. The ratings agency noted that eco- nomic growth across the Gulf re- gion is accelerating in 2023 and will remain strong in 2024, driven by high oil prices, economic diver- sification plans, and supportive business confidence. “Govern- ments' continued backing and pro- motion of the Islamic finance industry, growing demand for Shariah-compliant products across the GCC region, and ample funding will continue to drive faster growth for Islamic banking assets than con- ventional peers,” said Diane Soubra, associate analyst at Moody’s. S&P Global Ratings said in a recent report that GCC contributed 92 per cent of the growth in Islamic bank- ing assets, mostly led by Saudi Ara- bia and Kuwait. Driven by favourable dynamics in the GCC and a few other core markets, the size of the global Islamic finance industry is poised to cross the $3.0 the BANKING EXECUTIVE 30 ISSUE 177 SEPTEMBER 2023 HIGH OIL PRICES SET TO SPUR GCC ISLAMIC BANKS’ ASSET GROWTH