Saudi Arabia: The banking sector in the Gulf Cooperation Council is set for robust growth in 2025, supported by economic diversification efforts and favorable global financial conditions.

According to accounting firm Ernst & Young, economic expansion across the region — projected at 3.5 percent in 2025 — is driven by large-scale infrastructure projects, growing non-oil activity, and favorable monetary policies.

These projections align with numerous other rating agencies, including S&P Global, which stated in its latest banking sector outlook that financial institutions in the GCC region “are doing well” and expect their strong performance to continue throughout the year.

Saudi Arabia and the UAE, the two largest GCC economies, are expected to see non-oil growth exceed 3.4 percent, fueled by reforms and investment. “As we go into the first quarter of 2025, the GCC banking industry should remain strong due to considerable capital cushions, healthy asset quality indicators, and adequate profitability,” said the EY MENA Financial Services Leader, Mayur Pau.

Credit expansion

Saudi banks are witnessing steady credit expansion, propelled by Vision 2030 projects and a surge in private sector lending. “The country’s planned megaprojects will play a role in creating enormous business and lending opportunities for banks this year,” the report said.

Additionally, the Kingdom’s economic diversification strategies are providing long-term stability, with lending growth expected to remain robust throughout 2025.

The UAE banking sector is experiencing sustained growth in lending activities, aided by relaxed monetary policies and strong corporate and retail deposit inflows. “Asset quality will remain strong, as banks capitalize on high profits to provision for legacy loans,” the release stated. Credit demand, coupled with reduced borrowing costs, is set to drive further expansion.

Banks in Qatar remain well-capitalized, with strong Tier 1 and capital adequacy ratios exceeding regulatory thresholds. The ongoing expansion of Qatar’s liquefied natural gas sector is expected to generate fresh credit opportunities. 

“Domestic funding avenues are predicted to adequately finance credit expansion this year,” the report added.

In Oman, banking sector growth aligns with the country’s Vision 2040 diversification initiatives, which are boosting lending activity. 

Bahrain’s financial industry is benefiting from an uptick in private-sector investments and the completion of refinery upgrades. 

Kuwait’s banking sector maintains stability, backed by high foreign assets, accounting for 30.4 percent of total local bank assets.

Global factors

The US Federal Reserve’s 50 basis point rate cut in November has influenced GCC economies to follow suit, easing inflationary pressures and supporting economic activity. 

“This year, banks will pursue higher yields, as rate cuts tend to be reflected in their books with delayed effects,” the report explained. With Brent crude prices expected to remain above $74 per barrel through 2027, fiscal surpluses are anticipated to support financial stability.

GCC banks are accelerating their digital transformation efforts with increasing adoption of artificial intelligence, open banking, and digital currencies.