GCC Banks Optimistic on Loan Growth in 2025, Report Strong Performance in Q2 – S&P

GCC banks remain optimistic about loan growth in the region for the remainder of 2025, driven by favourable interest rates, according to S&P Global Market Intelligence.

In its outlook, the firm said the UAE, Saudi Arabia and Qatar markets are expected to reduce interest rates in step with US Federal Reserve in the second half of the year.

Last week’s US Fed decision to keep interest rates unchanged resulted in most GCC Central Banks opting to keep borrowing costs unchanged. The only exception was Kuwait, whose currency is not pegged to the US dollar.

However, analysts anticipate a cut is coming in September, based on the underlying softness in the US labour market data in July.

Sharp loan growth

With borrowing costs remaining steady this year, S&P’s Q2 data for the GCC revealed optimism in the market, with Saudi Arabia’s Al Rajhi Bank recorded the sharpest loan growth among the five biggest banks in the region, increasing to 19.31% from 7.37% a year earlier.

Domestic peer Saudi National Bank’s (SNB) loan growth rose year on year to 12.21% from 10.25%.

Banks in the UAE followed suit, with the country’s largest lender, First Abu Dhabi Bank (FAB), reporting a year-on-year uptick in loan growth, from 6.34% to 10.71% in Q2. The bank also raised its full-year guidance to low double-digit growth from its previous guidance of single-digit growth.

Meanwhile, the Dubai-based Emirates NBD Bank revised its own loan growth guidance to low double digits after reporting second-quarter loan growth of 14.28%.

Qatar National Bank (QNB) was the other major lender that registered a loan growth of 9.38% and also upgraded its loan growth guidance to 7%-9% from 5%-7%.

Net interest income rises

As lending increased, GCC banks also reported a net interest income (NII) rise in the second quarter, with Saudi’s Al Rajhi Bank reported the highest jump at 25% YoY to $1.95 billion.

This, along with higher net financing and investment income and banking services fees, propelled its net profit for the quarter to $1.64 billion, an increase of 31% YoY, S&P said.

QNB’s NII climbed to $2.34 billion from the year-ago $2.12 billion, despite margin pressures due to the impact of high interest rates in its Turkish business.

In its July earnings call, QNB’s senior vice president for group financial consolidation, Durraiz Khan, said the bank expects its net interest margin (NIM) to recover if Turkey cuts its rates in the second half of the year as projected.

GCC banks with exposures to Turkey can expect net monetary losses to lessen if the country’s inflation continues to cool, Fitch Ratings said in a June report.

Emirates NBD, which also operates in Turkey through its DenizBank AS unit, incurred a 22-basis-point decline in its second-quarter NIM to 3.36%. The bank expects its full-year NIM to be in the 3.3%–3.5% range with the anticipated recovery of DenizBank’s margins.

Emirates NBD’s NII for the quarter rose roughly 6% year over year to $2.28 billion.

The UAE’s FAB, which achieved a record quarterly profit after booking $1.50 billion in the second quarter, up 29% from $1.16 billion a year ago, saw its NII marginally rise to $1.35 billion from the previous year’s $1.34 billion.