Gulf Banks Poised For Robust Loan Growth Amid Rate Cut Expectations

The Gulf's largest banks are set to experience strong loan growth through the remainder of 2025, driven by anticipated interest rate cuts in line with the US Federal Reserve, according to analysts at S&P Global Ratings.

The Fed is expected to implement two rate cuts this year, with the first likely in September. Banks in Qatar, Saudi Arabia, and the UAE are projected to benefit the most from the easing cycle.

As lending activity picked up, net interest income (NII) rose across most major GCC banks in the second quarter, supported by lower regional rates and stronger loan demand.

Saudi Arabia's Al Rajhi Banking & Investment Corp led the region with a sharp rise in loan growth, surging to 19.31 per cent from 7.37 per cent a year earlier. Saudi National Bank followed with a year-on-year increase to 12.21 per cent from 10.25 per cent.

In the UAE, First Abu Dhabi Bank PJSC saw loan growth accelerate to 10.71 per cent from 6.34 per cent, prompting the lender to upgrade its full-year guidance to low double-digit growth. Emirates NBD Bank PJSC also revised its forecast upward after reporting 14.28 per cent loan growth in Q2.

Qatar National Bank QPSC (QNB) posted 9.38 per cent loan growth and raised its guidance to 7 per cent–9 per cent, up from 5 per cent–7 per cent. Nearly half of this growth stemmed from its Turkish operations, according to Durraiz Khan, senior vice president for group financial consolidation.

Despite margin pressures from high interest rates in Turkey, QNB's NII rose to $2.34 billion from $2.12 billion a year earlier. Khan noted that net interest margins (NIM) could recover if Turkey proceeds with expected rate cuts in the second half of the year, as deposits in Turkey reprice faster than loans.

Emirates NBD , which operates in Turkey via DenizBank AS, saw its Q2 NIM decline by 22 basis points to 3.36 per cent. The bank expects full-year NIM to range between 3.3 per cent and 3.5 per cent, supported by a potential recovery in DenizBank's margins. Its NII rose 6 per cent year over year to $2.28 billion.

According to Fitch Ratings, GCC banks with Turkish exposure could see net monetary losses ease if inflation in Turkey continues to cool.

Al Rajhi Bank posted the highest NII growth among the sampled banks, up 25 per cent year over year to $1.95 billion. This, along with gains in net financing, investment income, and banking fees, lifted its Q2 net profit to $1.64 billion-a 31 per cent increase.

First Abu Dhabi Bank reported a record quarterly profit of $1.50 billion, up 29 per cent from a year earlier. Saudi National Bank and QNB also saw net income rise by 18 per cent and 4 per cent, respectively.

Emirates NBD was the only bank in the sample to report a year-on-year profit decline, down 10 per cent, due to a $31 million impairment charge compared to a $374 million reversal in the same period last year.

Outlook

With monetary easing on the horizon and regional economies maintaining momentum, Gulf banks are well-positioned to capitalise on rising credit demand. Continued rate cuts, particularly in Turkey, could further support margin recovery and profitability for banks with cross-border exposure. As the macroeconomic environment stabilises, the region's top lenders are likely to maintain their growth trajectory, reinforcing their role as key drivers of financial activity across the GCC.

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