The profitability of Islamic banks in the Gulf Cooperation Council (GCC) countries will remain strong over the next 12 to 18 months, stated Moody’s in its latest report. The agency attributed the strong profitability of Gulf Islamic banks to robust commercial activity driven by government efforts to diversify economies across the region.
The report also noted that Islamic financing will continue to outperform its conventional counterpart due to the increasing demand for Sharia-compliant products and the stability of Islamic banks. Islamic banks adopt a fixed-rate retail financing model so their net profits are not impacted by changes in the U.S. Federal Reserve’s monetary policy. Moody’s also expects mergers to further support growth due to greater revenues and lower costs.
Therefore, Islamic banks in GCC countries will continue to maintain strong capital and liquidity, enabling them to capitalize on the growing demand for Sharia-compliant financial services in the Gulf region.
Badis Shubailat, assistant vice president and analyst at Moody’s, said that sustained economic growth, government commitment to bolstering the broader Islamic finance industry, and increasing demand for Sharia-compliant products in the GCC region will continue to drive Islamic finance growth, which will outpace its conventional peers.
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The agency also expects non-oil economic growth in GCC countries to remain strong in 2025 due to ambitious government economic diversification plans and strong business confidence.
In a separate release, Moody’s expected this year’s global sukuk issuance volumes to exceed last year’s, reaching between $200 billion and $210 billion, surpassing 2023’s total of $200 billion. Strong sovereign issuance across the GCC region and Southeast Asia, particularly Malaysia and Saudi Arabia, will further support issuance volumes.
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