EY GCC Banking Sector Outlook 2024 report

The GCC banking sector outlook report offers an in-depth analysis of the GCC banking industry, examining the competitive environment and comparing annual financial KPIs of the top 20 banks.

With strong financial foundations, government support, and strategic diversification, the GCC banking sector has been demonstrating resilience in the face of global economic shifts and regional challenges. This report highlights the key developments and trends in the GCC banking sector, offering insights into the regional outlook and competitive dynamics. As we look ahead to 2025, the sector promises to be transformative, with advancements in technology, shifts in consumer behavior and regulatory changes shaping the future of banking.

Despite potential modest impacts from changing interest rates, the regional banking industry is expected to remain strong in 2025. The GCC banking industry is set to benefit from stable oil prices, projected at US$74 per barrel and the ongoing economic diversification efforts across member states. These factors, along with the expansion of Qatar's gas production and transformative projects in Saudi Arabia, non-oil economic growth in Bahrain and the UAE are expected to drive the sector's growth. Despite potential risks from real estate market dynamics and geopolitical tensions, the banking sector's foundations are reinforced by substantial government support and strategic economic policies.

Credit growth has been a highlight across the GCC, with infrastructure development in Saudi Arabia and the UAE driving this trend. Banks are set to continue their positive trajectory, supported by increased lending, fee income and effective cost controls. However, they must remain vigilant of the challenges posed by oil market volatility and regional economic imbalances.

GDP growth is forecast to rebound to 3.5% in 2024, up from 1.4%, as oil production gradually increases, providing a boost to the region's economies. Hydrocarbon growth is likely to be 3.3%, while non-hydrocarbon sectors are forecast to grow at 3.4%, supported by strong domestic investment momentum. The banking sector’s performance is further strengthened by the expected continuation of interest rate cuts, which are likely to support the expansion of the non-oil sector and boost consumer spending.

As the GCC banking sector looks toward 2025, it does so with a stable and forward-looking stance. Banks are embracing cybersecurity and data privacy by design to differentiate themselves in a competitive market. This can help enhance robust protection of consumer data and compliance with regulations. With a focus on cost management and digital transformation, banks are well-equipped to handle margin pressures and maintain their profitability. The IMF forecasts an 8.2% GDP current account surplus and a 3.9% fiscal surplus for the region in 2025, with economic prospects potentially affected by geopolitical instability, shipping disruptions, climate change and protectionism. The sector's stability is also reflected in the decreasing exposure to riskier loans, showcasing the effectiveness of proactive asset management. Furthermore, banks are harnessing the power of generative AI (GenAI) to enhance operational efficiency and drive hyper-personalization of services. With strong capital buffers and a commitment to innovation, the GCC banking sector is set to navigate the future with confidence and success.

The report in this article has contributions from Tanay Rai, Charlie Alexander, Alya Alkhodair, Mohammad Rabbani, Vandana Sadasivan, Nidhin Jose, Bijoy Francis.