GCC banks seek to expand presence in major regional markets
Date
7/24/2024 2:46:33 AM
(MENAFN) Gulf Cooperation Council (GCC) banks are increasingly looking to expand their presence in major regional markets, particularly in Turkey, Egypt, and India, according to a report by Fitch Ratings released on Tuesday. These banks are drawn to the improving economic conditions and promising growth opportunities in these markets compared to their domestic environments. Fitch noted that GCC banks are exploring acquisitions in Turkey, Egypt, and India as part of their strategy to diversify their business models and enhance profitability.
Fitch Ratings highlighted that external growth is a key strategy for some GCC banks to mitigate weaker growth prospects in their home markets. By investing in high-growth markets, these banks aim to balance out the slower growth they experience domestically. Turkey, Egypt, and India offer significant opportunities due to their large populations and substantial growth potential in the banking sector, given their robust real GDP growth projections and relatively smaller banking systems compared to their economies.
The report pointed out that the banking system assets-to-GDP ratios in Turkey, Egypt, and India are below 100 percent, whereas in the largest GCC markets, this ratio exceeds 200 percent. Additionally, private credit-to-GDP ratios were notably lower in these countries in 2023, with Egypt at 27 percent, Turkey at 43 percent, and India at 60 percent. In contrast, GCC banks' primary exposure outside the GCC region is through their subsidiaries in Turkey and Egypt, where they held approximately USD 150 billion in assets as of the end of the first quarter of 2024.
Fitch emphasized that GCC banks' interest in Turkey has intensified following the country’s macroeconomic policy adjustments after last year's presidential election. These changes have alleviated external financing pressures and mitigated macroeconomic and financial stability risks. On June 25, Fitch revised its outlook on the Turkish banking sector to “improving” from “neutral” due to the favorable effects of Turkey’s adoption of more conventional macroeconomic policies. Additionally, Fitch upgraded Turkey's credit rating to B+ from B on March 8, maintaining a positive outlook.
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