The GCC banking sector posted a net profit of $15.6 billion during the first quarter of 2025, up 7.1 percent quarterly and 8.6 percent annually. This growth marked a new record high for the sector, despite a decline in net interest income during the quarter.
However, growth was mainly driven by higher non-interest income, lower operating expenses as well as a sharp seasonal decline in impairments during the quarter.
According to the latest report by Kamco Invest, the decline in net interest income reflected the impact of rate cuts during the second half of 2024, with aggregate yield on credit for the GCC banking sector falling by 5 bps to 4.16 percent in Q1 2025 compared to 4.21 percent in Q4 2024.
UAE-listed banks mark highest growth
At the country level, the quarterly growth remained largely positive, with five out of six GCC countries showing a sequential growth in net income, while the aggregate for the Kuwaiti banking sector showed a marginal decline.
UAE-listed banks showed the biggest absolute growth in net profits with an increase of $639.6 million or 11.8 percent, followed by Saudi Arabia and Bahrain banks with growth of $338.4 million and $72.6 million, respectively.
The y-o-y growth in net income was also mixed, with Qatar and Kuwaiti listed banks showing declines, while Saudi Arabian banks showed double-digit growth of 17.2 percent.
Qatari banks post biggest revenue increase
In terms of topline performance, aggregate GCC banking sector revenues reached a new record high during the quarter of $34.6 billion, although the growth was the smallest in four quarters at 0.04 percent. The minor growth was led by a decline in revenues reported by banks in Kuwait and Oman that almost fully offset the increase in revenues registered in other GCC countries.
The report revealed that Qatari banks posted the biggest increase in revenues with a quarterly gain of 2.1 percent, followed by Saudi and UAE-listed banks with distinctly smaller growths of 1.6 percent and 0.6 percent, respectively.
Lending growth also remained resilient during the quarter, with net loans registering a sequential growth of 4.1 percent in Q1 2025, the highest in 15 months, to reach $2.2 trillion. The growth reflected resilient non-oil sector growth in the region, with non-oil manufacturing consistently well above the growth mark for key economies in the GCC region.
Gross loans also showed a healthy growth of 3.6 percent during the quarter.
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Financial market volatility drives growth in customer deposits
Total customer deposits in the GCC banking sector also reached a new record high level at the end of Q1 2025 at $2.65 trillion, registering a quarterly growth of 5.1 percent. This was one of the biggest quarterly growths recorded in the GCC and was most likely led by volatility in financial markets that led to an increase in flows towards regional banks’ deposits.
The annual growth, when compared to Q1 2024, came in at 9.9 percent. This growth was broad-based, as seen in higher quarterly customer deposits in almost all countries in the GCC.
At the country level, UAE-listed banks registered the strongest growth in deposits during the quarter, reaching $903.8 billion after a quarterly growth of 6.7 percent. Qatari banks were next with a growth of 6.1 percent, reporting total customer deposits of $438.9 billion, followed by banks in Saudi Arabia with a growth of 4.8 percent. Banks in Bahrain, Oman and Kuwait, reported slightly smaller customer deposit growth during the quarter.
