DUBAI (Realist English). The banking sector of the Gulf countries closed the first quarter of 2026 at record levels, despite rising geopolitical tensions near Iran and continued volatility in global oil markets.
Leading banks in the UAE and Saudi Arabia reported double-digit revenue growth and strong credit expansion, while international rating agencies maintain a broadly stable outlook for the region, with upgrades for its largest economies.
Big Picture: $4 Trillion in Assets and Strong Risk Appetite
The combined banking assets of the six Gulf Cooperation Council (GCC) countries — Bahrain, Qatar, Kuwait, the UAE, Oman, and Saudi Arabia — are estimated at around $4 trillion. Together with sovereign wealth funds and foreign reserves of $6–7 trillion, this creates a substantial financial buffer.
UAE banking assets alone have surpassed $1.48 trillion, supported by a capital adequacy ratio of around 17% and liquidity coverage of 146.6%.
According to S&P Global Ratings, the average long-term rating of GCC banks stands at “A-” (as of November 2025), with expected credit losses in 2026 at 50–60 basis points. Over the past five years, banks in the region have issued more than $700 billion in new loans.
KPMG’s Resilience in a Shifting Environment report highlights strong asset growth, solid profitability, stable non-performing loan ratios, and improved returns on equity across the sector.
UAE: Record Earnings and Expansion
The United Arab Emirates remains the standout performer, with major banks posting record results.
Emirates NBD, Dubai’s largest bank, reported record total income of AED 14.4 billion ($3.9 billion), up 21% year-on-year. Net profit rose 3% year-on-year and 27% quarter-on-quarter to AED 6.4 billion ($1.74 billion).
Non-interest income surged 42%, while net interest margin stood at 3.35%. The bank’s balance sheet exceeded AED 1.2 trillion for the first time, and deposits grew to AED 830 billion.
Abu Dhabi Commercial Bank (ADCB) posted record pre-tax profit of AED 3.78 billion ($1.03 billion) (+30% year-on-year), marking its 19th consecutive quarter of growth.
Dubai Islamic Bank (DIB) reported net profit of AED 1.8 billion ($490 million), while its subsidiary Emirates Islamic increased operating profit by 7%.
Moody’s upgraded the UAE banking sector outlook to “positive” in February 2026, citing improved economic conditions.
Saudi Arabia: Growth Driven by Corporate Lending
Saudi Arabia’s banking sector continues to expand, supported by the Vision 2030 program.
The combined net profit of the kingdom’s ten listed banks reached SAR 23.95 billion ($6.4 billion), up 8% year-on-year.
Saudi National Bank and Al Rajhi Bank both exceeded market expectations. Al Rajhi reported a 14.3% increase in net profit, driven by an 18.4% rise in financing and a 17% increase in fee income.
S&P expects corporate lending demand to remain the key growth driver.
Qatar, Kuwait, Oman: Mixed Dynamics
In Qatar, growth has slowed. Net profits of 45 listed companies declined by 3.3%, reflecting a broader cooling trend.
Qatar Islamic Bank posted a slight increase in profit to QAR 985.6 million, while the Commercial Bank of Qatar reported QAR 538.3 million in pre-tax profit.
In Kuwait, performance remains stable:
- National Bank of Kuwait — KD 135.5 million (+1%)
- Kuwait Finance House — KD 176.5 million (+6%)
- Gulf Bank — KD 9.4 million (flat)
Oman is showing stronger momentum:
- Bank Muscat — profit up 9% to OMR 64 million
- National Bank of Oman — profit up 14% to OMR 19.5 million
Moody’s revised Oman’s outlook to “positive”, expecting non-oil sector growth to support credit demand.
Outlook and Expert Views
Fitch expects regional lending growth of around 8%, including:
- UAE — 12%
- Saudi Arabia — 10%
S&P forecasts GCC economic growth at 3.1% in 2026, assuming oil prices stabilize around $60 per barrel.
Moody’s notes that banks are offsetting lower interest rates through higher lending volumes. Non-oil GDP growth is expected at 4.2%.
According to Moody’s Vice President Michel Karam:
“Despite declining rates, GCC banks are showing remarkable resilience due to low non-performing loans and expanding credit volumes.”
The IMF projects regional GDP growth of 3.9% in 2026.
Boston Consulting Group estimates total financial wealth in the region will reach $3.5 trillion by 2026–2027.
Risks: Margin Pressure
Analysts warn of pressure on net interest margins.
GlobalData analyst Joanne Kumer notes:
“Asset yields are declining faster than funding costs, compressing margins.”
Saudi banks, however, are seen as better positioned to manage this transition.
Consolidation and Technology
KPMG expects further consolidation in the banking sector, along with accelerated adoption of artificial intelligence and regulatory technology (regtech).
These trends are likely to improve efficiency and strengthen risk management.
The Gulf banking sector is demonstrating strong resilience amid geopolitical tensions. However, record profits and robust lending growth mask structural risks: falling interest rates are putting pressure on margins, while non-oil sectors — key growth drivers in the UAE and Saudi Arabia — require massive investment.
The key question is whether GCC banks can absorb these pressures without compromising asset quality.
