Gulf Cooperation Council (GCC) banks are expected to perform well for the rest of 2024, thanks to a 10.4% increase in lending in the first half of the year, according to an S&P Global report. This growth, up from 6.7% in 2023, is driven by non-oil sector activities in Saudi Arabia and the UAE, showing a shift from reliance on oil revenues.
Despite higher interest rates stabilizing margins at 2.7%, deposit migration from non-interest-bearing accounts continues. Non-oil sector growth has helped maintain asset quality, with a cost of risk between 60-70 basis points.
Return on assets rose to 1.74%, supported by strong provisions and capital positions, with Tier 1 ratios at 17.1%. Challenges remain in real estate in Qatar and Kuwait, but robust provisions and government support help mitigate risks.
While a projected US Federal Reserve rate cut may reduce net income by 12%, cost control measures are expected to ease the impact, supporting asset quality. Geopolitical risks are also considered manageable, with GCC sovereigns prepared to handle potential fallout.