GCC banks ride wave of economic diversification, poised for robust year
Image: Getty Images/ For illustrative purposes
GCC banks are set to maintain strong performance in 2025, supported by robust capital levels and resilient economic conditions, according to the recent EY
GCC Banking Sector Outlook 2024
report.
The report highlights that the expansion of gas production in Qatar, economic transformation projects in Saudi Arabia, and non-oil economic growth in Bahrain and the UAE will underpin the sector's resilience.
Furthermore, Brent crude prices are projected to remain above $74 per barrel through 2027, bolstering banking sector stability.
Credit growth across most GCC countries is driven by a strong project pipeline, particularly in infrastructure development in Saudi Arabia and the UAE. This positive trend is expected to continue, supported by rising lending volumes, increased fee income, stable margins, and effective cost management.
As lending costs become more favourable, GCC countries may increase global investments.
Mayur Paul,
GDP growth on the rise
GCC GDP growth is projected at 3.5 per cent in 2025, with non-oil growth exceeding 3.4 per cent in Saudi Arabia and the UAE. The IMF forecasts a current account surplus of 8.2 per cent of GDP and a fiscal surplus of 3.9 per cent of GDP for 2025.
Global oil demand is expected to increase to 104.5 million barrels per day (mbpd) in 2025.
High oil prices, averaging $81 per barrel in 2024, and favorable economic growth have supported GCC banks' finances.
In 2024, GCC GDP growth rebounded to 3.5per cent, driven by increased oil production and strong domestic investment. Hydrocarbon growth is projected at 3.3 per cent, and non-hydrocarbon sectors at 3.4 per cent.
GCC economies are following the US Federal Reserve's interest rate cuts, which, along with domestic policies, have helped lower inflation. GCC banks have shown sustained credit growth, supported by economic transformation plans and robust project pipelines.
Outlook for GCC banks
UAE banks are expected to maintain strong lending growth, with deposits outpacing lending. Saudi Arabian banks reported healthy credit growth, driven by private sector loans and Vision 2030 projects.
Qatari banks exhibit strong profitability and capital strength. Omani banks' lending growth aligns with non-oil economic activities and Vision 2040 initiatives. Bahrain is poised for robust economic growth and increased credit growth. Kuwait's banking sector has enjoyed high profitability and stability.
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