Banks in the United Arab Emirates and Saudi Arabia are expected to lead credit growth across the Gulf Cooperation Council (GCC) in 2026, supported by strong domestic economies, government investment programs and solid banking fundamentals, according to a new report by S&P Global Ratings.
The ratings agency forecasts average credit growth of between 5 and 6 percent across GCC banking systems this year, with lending in the UAE and Saudi Arabia expected to expand at higher single-digit rates, outperforming other markets in the region.
S&P said continued government spending on infrastructure, resilient consumer demand and sustained economic activity are likely to support loan growth in both countries, even as the pace of economic expansion across the GCC moderates.
In the UAE, sectors including tourism, manufacturing, trade, construction and real estate account for about 45 percent of real gross domestic product. While these industries could face some pressure from slower global growth, S&P expects government-led projects and increased oil production to help sustain business activity and keep demand for credit relatively strong.
The report also highlighted the strength of the region’s banking sector, noting that the average Tier 1 capital ratio among the GCC’s 50 largest banks stood at approximately 17 percent at the end of March 2026. This level of capitalization provides banks with a substantial financial cushion against potential economic shocks.
Asset quality has also remained stable, with the average non-performing loan ratio holding at 2.6 percent across the region. S&P noted that many UAE banks have increased their loan-loss provisions in recent years, strengthening their balance sheets and improving their ability to manage future risks.
Deposit growth continued to exceed credit growth during the first quarter of 2026, supported by significant public-sector funding. Governments and state-owned entities injected about $53 billion into GCC banking systems during the first three months of the year, followed by another $21 billion in April.
Banks have also maintained healthy liquidity positions, with liquid assets accounting for roughly one-fifth of total balance sheets. According to S&P, UAE banks possess strong external liquidity and remain well placed to withstand periods of financial market volatility.
The ratings agency said nearly all of its outlooks for GCC banks remain stable, reflecting confidence in the sector’s resilience despite an uncertain global economic environment.
Although profitability may ease slightly over the next two years because of slower lending growth and higher provisioning costs, S&P expects banks in the UAE and Saudi Arabia to remain among the region’s strongest performers. Their larger domestic markets, efficient operations and relatively low funding costs are expected to support earnings while allowing lenders to continue financing economic development across the Gulf.
