The Gulf’s largest banks are poised for strong loan growth in the second half of 2025, buoyed by anticipated interest rate cuts from the US Federal Reserve and rising credit demand across the region, according to analysts at S&P Global Ratings.
The Federal Reserve is expected to lower rates twice this year, beginning as early as September, a move likely to trigger similar monetary easing in Gulf economies. Analysts project that banks in Saudi Arabia, the UAE, and Qatar will benefit most from the cycle.
As lending activity accelerates, major banks across the GCC have already reported significant increases in net interest income (NII) and loan volumes during the second quarter.
Saudi Arabia’s Al Rajhi Bank led regional peers with loan growth surging to 19.31% year-on-year, up from 7.37% a year ago. Saudi National Bank followed with a rise to 12.21% from 10.25%. In the UAE, First Abu Dhabi Bank (FAB) reported a jump in loan growth to 10.71%, compared to 6.34% a year earlier, prompting the lender to raise its full-year guidance to low double-digit expansion. Emirates NBD also revised its outlook after recording 14.28% growth.
Qatar National Bank (QNB) posted 9.38% loan growth, increasing its annual projection to 7–9%, up from 5–7%. Nearly half of this expansion came from its Turkish operations, despite continued margin pressure due to elevated interest rates in Turkey. QNB’s NII rose to $2.34 billion in Q2, up from $2.12 billion a year ago.
Expectations of rate cuts in Turkey could further boost earnings for banks with exposure there. Emirates NBD, which owns DenizBank in Turkey, saw its net interest margin (NIM) dip by 22 basis points to 3.36% but anticipates a recovery later this year. The bank’s NII rose 6% year-on-year to $2.28 billion, although overall profits declined by 10% due to impairment charges.
Al Rajhi Bank posted the highest NII growth among its peers, rising 25% to $1.95 billion, driven by gains in financing, investments, and fee income. Its Q2 net profit climbed 31% to $1.64 billion. First Abu Dhabi Bank followed closely with a record quarterly profit of $1.50 billion, up 29%. Saudi National Bank and QNB reported profit growth of 18% and 4%, respectively.
According to Fitch Ratings, inflation easing in Turkey could reduce monetary losses for GCC banks with Turkish exposure, offering a further lift to margins and earnings.
Outlook
With regional economies remaining resilient and rate cuts likely to stimulate lending, Gulf banks are expected to maintain their upward momentum. As macroeconomic conditions stabilize, top lenders are well-positioned to capitalize on growing credit demand and reinforce their role as financial anchors in the GCC.
