S&P Global forecasts resilient banking sectors in UAE, Qatar, and Kuwait through 2025

DUBAI: According to a recent analysis by S&P Global, the banking sectors in the UAE, Qatar, and Kuwait are projected to remain stable and resilient through 2025, supported by strong capital bases, favourable economic conditions, and proactive government policies, reported nukta.com

The outlook for the region reflects significant economic growth, solid financial foundations, and a cautious approach to risk management

UAE

The UAE’s banking sector is anticipated to stay robust in 2025, with improvements in asset quality and a reduction in credit losses. S&P Global predicts that UAE banks will continue to gain from their strong capital buffers, solid funding structures, and ongoing government backing, ensuring their resilience.

A major contributor to the stability of UAE banks has been the notable rise in deposits over recent years, as both private companies and retail customers’ focus on saving rather than spending. This trend has led to higher deposit growth, which is expected to support the banks’ growth trajectories in 2025. Additionally, rising interest rates have provided better returns, further encouraging savings.

S&P Global notes that the non-oil economy will play a key role in sustaining growth in the UAE, which will bolster corporate cash flow generation and enhance the overall financial stability of the banking sector.

Kuwait

S&P Global forecasts improving asset quality in Kuwait, aided by a strengthening economy and decreasing interest rates. This optimistic outlook persists despite potential geopolitical tensions in the region, with the Kuwaiti banking sector well-equipped to manage these risks. Increased lending growth will help mitigate the impact of lower interest rates on profitability.

Following a minor contraction in 2024, Kuwait’s GDP is expected to rebound with a 3% growth rate in 2025, driven by a relaxation of OPEC+ production limits, enhanced project execution, and accelerated reforms. This economic recovery will likely support increased lending activity among Kuwaiti banks.

Furthermore, S&P Global highlights that Kuwaiti banks operate with strong capital buffers, retaining over 50% of their profits to maintain their financial health. With a stable core customer deposit base and a net external asset position, these banks are positioned to handle any challenges effectively.

Qatar

In Qatar, the banking sector is projected to sustain strong performance in 2025, bolstered by solid capital and ample liquidity. The growth of liquefied natural gas (LNG) production, alongside expansion in the non-hydrocarbon economy, is expected to drive credit growth in the coming years.

Local funding sources are anticipated to play a crucial role in supporting this credit expansion, particularly as the public sector gradually reduces its reliance on debt. S&P Global also underscores the government’s strong support for Qatar’s banking sector, which is expected to alleviate potential risks, including those arising from regional geopolitical tensions.

Despite existing high geopolitical risks, S&P Global does not anticipate a large-scale regional conflict and expects Qatar’s macroeconomic conditions to remain broadly stable, contributing further to the resilience of its banking sector.