Middle East Banks Thrive Amid High Oil Prices and Interest Rates: Fitch Ratings Report
Oliver Dwyer
Associate Partner - Investment Banking & Alternative Investment: Private Equity, Infrastructure, Energy
Fitch Ratings reports that high oil prices and interest rates are benefiting banks across the Middle East.
In a recent webinar on the region’s banking sector, Fitch Ratings highlighted Saudi Arabia's expected lending growth for fiscal year 2024, set to double the regional average of 5-6 percent due to significant non-oil GDP expansion.
This growth creates new opportunities for Saudi financial institutions and intensifies liquidity competition. Fitch praised the Gulf Cooperation Council (GCC) for its robust banking sector amidst strong oil prices, high interest rates, substantial government spending, and confidence from investors and consumers.
In contrast, the UAE has seen stronger liquidity, boosting bank profitability metrics through 2023 and Q1 2024, with average net interest margins improving.
Qatar's banking sector relies heavily on non-domestic funding, making it vulnerable to external shocks and investor sentiment shifts.
Fitch Ratings also noted improvements in UAE financial institutions and the advantageous positioning of banks in Saudi Arabia, Qatar, and the UAE to capitalize on rising interest rates through quick loan repricing and substantial low-cost funding.