October 10, 2016 / 5:35 AM / a year ago

MIDEAST STOCKS-Gulf may consolidate; concern over Saudi banks

DUBAI, Oct 10 (Reuters) - Gulf stock markets may consolidate on Monday with any major buying of shares deterred by concern over Saudi Arabia, where bank shares dropped sharply on Sunday.

The Saudi stock index sank 2.2 percent on Sunday as as the banking index tumbled 4.5 percent. Banks have been hit in recent weeks by concern the slumping construction sector could saddle them with bad debt, and by authorities’ decision to have them reschedule consumer loans to customers whose incomes have been hit by cuts to public sector allowances.

On Sunday the Okaz newspaper reported, citing unnamed sources, that the central bank had told banks to postpone for a month receiving payments on such loans as part of the rescheduling process.

While banks’ balance sheets are healthy and bad loans are very low, so most analysts don’t see a systemic threat to the sector, the Okaz report was a fresh sign that banks are being required to bear much of the burden of Saudi Arabia’s austerity drive.

In Dubai, troubled construction and engineering company Drake & Scull International, whose shares have been slumping partly because of its exposure to Saudi Arabia, may trade actively after it abruptly appointed Wael Allan as its new chief executive, replacing Khaldoun Tabari. It is expected to publish third-quarter earnings in the next few weeks.

The global market environment is slightly negative, with international stock markets barely changed and benchmark Brent oil down 44 cents at $51.49 a barrel.

Qatar National Bank, the Gulf’s biggest listed lender, is expected to announce third-quarter earnings after the close on Monday. (Reporting by Andrew Torchia)

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