Gulf banks stand ready for strong loan expansion due to anticipated interest rate reductions
Gulf Banks Set for Strong Loan Growth in 2025
The Gulf Cooperation Council (GCC) banks in Qatar, Saudi Arabia, and the UAE are projected to maintain double-digit or near double-digit loan growth rates for the remainder of 2025, according to recent reports. This growth is expected to be significantly boosted by the anticipated easing of interest rates from the US Federal Reserve, which is predicted to reduce borrowing costs and encourage credit expansion across the region.
In Q2 2025, Saudi Arabia’s Al Rajhi Banking & Investment Corp led the region with a 19.31% year-on-year loan growth, a sharp increase from the 7.37% recorded the previous year. Saudi National Bank followed closely, recording loan growth of 12.21% in Q2 2025, up from 10.25% a year earlier.
In the UAE, First Abu Dhabi Bank (FAB) showed a loan growth rise to 10.71% in Q2 2025, nearly doubling the 6.34% from the previous year. FAB also raised its full-year loan growth guidance to low double digits, reflecting confidence in continued strong growth. Emirates NBD, another large UAE lender, posted 14.3% loan growth in Q2 2025 and similarly upgraded its growth forecast.
The loan growth surge is primarily attributed to an easing of interest rates in the Gulf region, aligned with the expected two US Federal Reserve interest rate cuts in 2025, beginning possibly in September. Lower interest rates in the region make borrowing cheaper, thus stimulating loan demand. This is supported by positive economic outlooks and stronger investor sentiment.
The UAE is expected to remain among the strongest performers in the GCC, according to the World Bank. Emirates NBD Bank PJSC revised its forecast upward after reporting 14.28% loan growth in Q2. Nearly half of Qatar National Bank's growth stemmed from its Turkish operations.
Notably, Emirates NBD’s Q2 net interest margins (NIM) declined by 22 basis points to 3.36%. However, Al Rajhi Bank's net interest income (NII) grew by 25% year over year, reaching $1.95 billion. First Abu Dhabi Bank reported a record quarterly profit of $1.50 billion, up 29% from a year earlier. QNB's net income increased by 4% in the given period.
Continued rate cuts, particularly in Turkey, could further support margin recovery and profitability for banks with cross-border exposure. The Gulf’s largest banks are expected to experience strong loan growth through the remainder of 2025, driven by anticipated interest rate cuts.
In summary, the GCC banks are well-positioned to capitalize on rising credit demand due to monetary easing and regional economies maintaining momentum. The region's top lenders are likely to maintain their growth trajectory, reinforcing their role as key drivers of financial activity across the GCC.
- The strong loan growth in GCC banks for the rest of 2025 is predicted to be closely tied to personal-finance factors, such as the anticipated interest rate cuts from the US Federal Reserve that would lower borrowing costs and stimulate credit expansion.
- In light of a positive economic outlook and stronger investor sentiment, the UAE is expected to remain one of the strongest performers in the GCC, with banks like Emirates NBD showing signs of increased loan growth.
- The business sector, particularly the finance sector, stands to gain significantly from the expected loan growth in the GCC, as the region's top lenders are poised to maintain their growth trajectory and reinforce their role as key drivers of financial activity across the GCC.
- For investors who focus on personal-finance and business-related matters, the ongoing loan growth in the GCC, driven by interest rate cuts, presents an opportunity for potential investments in banks and financial institutions operating in the region.
