meed-logo

line1 line2 line3
SIGN IN / REGISTER

Bahrain banks have cause for cheer

8 November 2023

Bahrain’s crowded banking sector has seen a sustained improvement in performance over the past year, amid generally stable economic conditions in which higher oil prices and procyclical public spending play a key role.

Loan books are in good shape. According to the Central Bank of Bahrain (CBB), the non-performing loan (NPL) ratio of conventional wholesale banks stood at just 2.1 per cent in the second quarter of 2023, compared to 2.5 per cent in the same period in 2022 – and well down on the 5 per cent seen at the height of the Covid-19 crisis.

Profitability has returned to banks, and higher interest rates – one source of those profits – have not yet had a material impact on loan quality.

Bank metrics have held up quite well, says Amin Sakhri, director – financial institutions, at Fitch Ratings. “There is a broadly stable NPL ratio and deterioration has been contained. We could have expected to see higher rates causing deterioration of asset quality in 2023 but the impact has been limited. We were seeing some deterioration, but it is very well contained.”

In addition, says Sakhri, liquidity in the system remains strong and is supported by higher oil prices. Capital buffers also remain sound and are supported by healthy internal capital generation from profitability overall.

Strong profit growth

The largest banks have seen profits swell this year. Bank of Bahrain & Kuwait showed a 20.9 per cent increase in first-half 2023 profits to BD37m ($98m), on the back of higher net interest income. National Bank of Bahrain showed a smaller 4 per cent increase in net income to BD40.8m ($108m) for the six months to the end of June, driven by higher income from loans and investment securities.

Even so, the overall profitabily of Bahraini banks is low compared to that of competitor countries. The system-weighted average return on assets at 1.2 per cent in 2022 was the lowest in the GCC region, according to the Washington-based IMF, which may reflect intense competition in a market that comprises 75 conventional and Islamic banks.

The shifting global interest rate environment inevitably has a bearing on performances.

According to S&P Global Ratings, a higher-for-longer interest environment means liquidity will be scarcer and more expensive, potentially affecting Bahrain, which has a growing external debt position. The agency points out that Bahrain's retail banks have large and expanding net external liabilities, which at the end of the first quarter of 2023 reached 26 per cent of total domestic lending. Against that, S&P Global Ratings notes that 60 per cent of the foreign liabilities are interbank, and 60 per cent are sourced from the GCC, giving reassurance that external funding will remain stable.

Loan-to-deposit ratios consistently below 80 per cent are another indicator that local deposits and external liabilities are recycled into government and local central bank exposures, said S&P.

Banks that are more corporate-focused benefit more on the asset side because the loans are on floating rates and re-price more quickly upon rate hikes, says Sakhri. “High rates have been supportive, but a bit less so than in markets like Saudi Arabia or the UAE, as these have higher proportions of lower-cost funding.”

Well capitalised

The strong capital positions of Bahraini lenders are a source of strength when it comes to supporting domestic project activity.

“Generally, Bahraini banks are well capitalised. The average Common Equity Tier 1 (CET1) ratio is solid, even in a GCC context, and the loan-to-deposit ratio, as reported by the CBB, is fairly low,” says Sakhri.

This means banks have the ability to absorb a large part of these projects. “We are not really concerned in terms of where banks are going to deploy capital, but it is important to bear in mind that households are under pressure, primarily due to the increase in the cost of living,” Sakhri adds.

Another area where Bahrain has been a regional leader is in financial technology (fintech) and digital banking. According to the World Bank Global Fintech Database, Bahrain was already a leader compared to the region and upper middle-income countries in 2017, with about 80 per cent of the population having made use of digital payments.

Since then, Bahrain has taken significant regulatory steps to create a favourable environment for fintech, including the introduction of a fintech unit at the CBB, a regulatory sandbox and new regulations for the digitalisation of banking and payment services.

As the IMF noted in a September 2023 assessment, digital payment service solutions, such as mobile payment applications, contactless payment cards and e-wallets, have been adopted by the public.   

Meanwhile, the door is still open for consolidation in a crowded banking system. The majority of these lenders are small, but just three of the country’s banks have a 50 per cent share of total assets.

The merger of Ahli United Bank and with Kuwait Finance House in 2022 was a cross-border deal, but the traditional drivers for domestic consolidation – which in the Gulf tend to be state equity owners looking to rationalise their shareholdings – are largely absent in Bahrain.

“Bahraini banks are generally profitable and their financial profiles are healthy, so there is no immediate need for mergers,” says Sakhri.

That will leave the country with perhaps more banks than it strictly needs, a legacy of its former position as the Gulf’s main financial centre.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11273948/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Large-scale IPPs drive UAE power market

    6 April 2026

     

    State utility Emirates Water & Electricity Company (Ewec) recently announced it had received four bids for the development of the 3.3GW Al-Nouf independent power producer (IPP) project in Abu Dhabi.

    The facility is scheduled to be one of at least four major IPP projects to reach contract award this year as the IPP procurement model becomes increasingly popular in the UAE for large-scale power generation projects.

    The four IPP projects include the planned 2.5GW Taweelah C combined-cycle gas turbine plant, the 1.5GW Al-Zarraf solar photovoltaic (PV) plant and the 1.5GW Madinat Zayed open-cycle gas turbine plant.

    As of the beginning of April, these accounted for $9.3bn, or 92%, of total power projects under bid evaluation. To put that into context, the UAE’s power market recorded its highest annual total for contract awards on record in 2025, with $11.8bn in confirmed awards.

    Three of these were IPP projects, making up $8.1bn, or 69%, of total awards. In 2024, that number was lower again, with just one IPP project accounting for 26% of total power awards.

    The last time contract awards surpassed $5bn was in 2018, when the Hamriyah combined-cycle plant accounted for 21%.

    IPP awards

    Among recent awards, a consortium of France’s Engie and Abu Dhabi Future Energy Company (Masdar) signed a contract in November to develop the 1.5GW Khazna solar PV IPP. 

    A month previously, Etihad Water & Electricity (EtihadWE) and South Korea’s Kepco won the award to develop a 400MW battery energy storage system (bess) project following the same IPP model.

    That same month, Abu Dhabi’s landmark $6bn solar plant and 19GWh bess project entered construction, with Larsen & Toubro (India) and Power China working as contractors.

    This project can be considered somewhat of an outlier, inflating the total value of awards in 2025. Otherwise, power contract awards remained broadly in line with the $5.7bn-worth of contract awards the year before.

    Project pipeline

    Looking further into the pipeline, the trend looks set to continue, with two IPP projects currently under main contract bidding, representing almost all of the $3.7bn-worth of projects at this stage.

    The first, and by far, the largest concerns the seventh phase of Dubai Electricity & Water Authority’s (Dewa) Mohammed Bin Rashid Al-Maktoum Solar Park, which is estimated to cost $3.4bn.

    Phase seven will add 2,000MW from PV solar panels and include a 1,400MW bess with a six-hour capacity.

    The other relates to the Al-Sila wind IPP, a greenfield renewable energy project with a generation capacity of up to 140MW. When fully operational, it will more than double the existing wind generation capacity in the UAE.

    Five of the six IPP projects in the pipeline are being procured by Abu Dhabi’s Ewec, which also continues to advance its solar PV programme as part of plans to reach 10GW of capacity by 2030.

    The offtaker told MEED that, following the groundbreaking of the Abu Dhabi bess project, also known as PV5, it has been seeking government approvals to release a request for proposals for PV6 and PV7. If all goes according to plan, the expression of interest process should be launched soon.

    Transmission

    Beyond generation, there remains a steady flow of transmission infrastructure investment, led by Taqa Transmission, which awarded $830m across 11 grid projects last year.

    The largest of these involves a $240m contract to build three 400kV substations in Abu Dhabi. Larsen & Toubro, Germany’s Siemens Energy and Japan’s Toshiba are working as the main contractor.

    Total power transmission contracts reached $2.8bn in 2025, a slight increase from $2.5bn the year before.

    Transmission and distribution upgrades have become central to maintaining grid stability and integrating intermittent renewables. Ewec and Taqa are expanding 400kV and 132kV networks across Abu Dhabi and the Northern Emirates, while Dewa continues to reinforce its cable and substation systems in Dubai. These works are vital precursors to the next phase of large-scale solar and battery storage integration.

    Waste-to-energy

    Waste-to-energy (WTE) is becoming an increasingly important part of the UAE’s infrastructure pipeline as the country seeks to reduce landfill dependence and diversify its power mix through alternative generation sources.

    In Ajman, Ajman Sewerage Private Company is progressing the fourth-phase expansion of its sewerage system, which includes the flagship sludge-to-energy (S2E) facility. Belgium’s Besix has been appointed as the engineering, procurement and construction contractor.

    In Sharjah, Emirates Waste to Energy Company, a joint venture of Beeah Group and Tadweer Group, is planning the second phase of its WTE treatment plant. The estimated $200m expansion is expected to almost double the facility’s annual output to 60MW, while increasing processing capacity to 600,000 tonnes of hard-to-recycle waste a year.

    It is understood that a consortium led by Samsung E&A and China Everbright Environment Group has submitted the lowest bid, with a contract award expected in the coming months.

    Meanwhile, Dubai Municipality issued a tender in February for consultancy services related to the second phase of the Warsan WTE Plant. The scheme is estimated to cost $500m and follows the emirate’s first major WTE public-private partnership project, which entered full commercial operations in 2024.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16270109/main.gif
    Mark Dowdall
  • UAE rail momentum grows as trade routes face strain

    6 April 2026

     

    Rail has shifted from a long-term diversification play to an immediate strategic imperative for the UAE. The regional conflict and its ripple effects on risk premiums, insurance costs and schedule reliability have highlighted the vulnerability of traditional logistics routes and maritime chokepoints.

    Against this backdrop, the country’s infrastructure pipeline – particularly rail – now serves as both an economic enabler and a resilience strategy. On the freight side, Abu Dhabi’s Hafeet Rail and the expanding Etihad Rail network are laying the groundwork for higher-capacity, lower-volatility overland transport, reducing reliance on sea-based supply chains.

    Inland connectivity is already being prioritised to counter supply chain disruption, including the recent opening of a green corridor with Oman to accelerate cross-border flows.

    The importance of the programme is equally evident in passenger mobility. Projects such as the Etihad high-speed rail and Dubai Metro’s Blue Line signal a parallel effort to reshape commuting patterns, strengthen labour-market connectivity and support transit-oriented development.

    Network integration

    The next step is to transform these corridors into a fully integrated system. This includes linking rail and road networks with industrial zones, logistics parks and inland terminals, while strengthening redundancy through connections to strategic gateways such as Fujairah Port, which, due to its east coast location, provides an alternative route that reduces exposure to disruption around the Strait of Hormuz.

    Together, freight and passenger rail – combined with planned investments in airports and road network upgrades – are becoming the backbone of the UAE’s next infrastructure cycle. This integrated system not only expands capacity but also strengthens economic resilience, helping to keep trade and urban movement functioning during periods of disruption.

    Pipeline outlook

    According to data from regional projects tracker MEED Projects, the UAE has an infrastructure pipeline valued at about $63bn, covering airports, railways and road schemes.

    In November last year, the UAE’s Minister of Energy and Infrastructure, Suhail Al-Mazrouei, announced a AED170bn ($46bn) package of national transport and road projects to be delivered by 2030.

    Speaking at the UAE Government Annual Meetings in Abu Dhabi on 5 November, Al-Mazrouei said the projects form part of a national strategy to ease congestion and enhance mobility. Initiatives include road expansions, public transport upgrades, and the development of high-speed and light rail systems.

    Key road projects include adding six lanes (three in each direction) to Etihad Road, increasing capacity by 60% to a total of 12 lanes. Emirates Road will be expanded to 10 lanes along its full length, boosting capacity by 65% and reducing travel time by 45%. Sheikh Mohammed Bin Zayed Road will also be widened to 10 lanes, increasing capacity by 45%.

    The plan also includes a study for a fourth federal highway, extending 120 kilometres with 12 lanes and a capacity of up to 360,000 trips a day.

    Work has already begun on the AED750m Emirates Road upgrade, which is expected to be completed within two years.

    Rail progress

    Etihad Rail remains on track to launch passenger services by 2026 and has awarded multibillion-dollar design-and-build contracts for the civil works and station packages of the high-speed rail (HSR) line connecting Abu Dhabi and Dubai.

    Trains on the UAE’s HSR network are designed for speeds of up to 350km/h, with an operating speed of 320km/h. The programme will be delivered in four phases, gradually extending connectivity across the country.

    Procurement is also progressing for the Abu Dhabi Tram Line 4 project. The first phase, announced by Abu Dhabi Transport Company in October last year, will connect Zayed International airport with nearby areas including Yas Island, Al-Raha Beach and Khalifa City. Prequalification has been completed, and the tender is expected to be issued soon.

    In Dubai, the most significant infrastructure project is the first-phase expansion of Al Maktoum International airport. Dubai Aviation Engineering Projects received contractor proposals on 31 March for three superstructure packages. A contractor was selected last year for the substructure works.

    Dubai is also planning to connect Al-Maktoum International airport to the metro network. In March, consultants submitted proposals for the design of the Route 2020 extension, which will link the Expo 2020 station to the airport’s West Terminal.

    Another major project is the Dubai Metro Gold Line. In October last year, Dubai’s Roads & Transport Authority appointed US-based engineering firm Aecom to provide consultancy services for the scheme.

    War casts shadow over UAE construction boom

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16267919/main.gif
    Yasir Iqbal
  • War casts shadow over UAE construction boom

    6 April 2026

     

    The UAE’s construction sector entered the year in a position of strength. According to regional projects tracker MEED Projects, contract awards reached $59bn in 2025, a record that surpassed the $53bn awarded in 2024.

    With market conditions expected to remain buoyant, 2026 was forecast to be another strong year. However, the Iran conflict that began on 28 February is set to change that narrative.

    In the short term, the construction sector proved resilient during the first weeks of the conflict. With the exception of a few sites in high-risk zones, construction activity across the UAE has largely continued uninterrupted.

    Cost pressures

    Despite continued activity on the ground, the industry is bracing for cost escalation. Brent crude prices have risen well above the $100-a-barrel mark. For the construction sector, the impact was felt most acutely on 1 April, when the UAE adjusted its domestic fuel prices.

    Diesel surged to AED4.69 a litre, up sharply from AED2.72 in March. This nearly 72% increase has immediate and far-reaching implications for project overheads, affecting heavy machinery operations, site power generation, and the transport of bulk materials such as sand, steel and cement.

    For projects signed under fixed-price contracts during the lower-inflation environment of 2024 and 2025, these increases pose a significant threat to contractor margins and potentially to overall project viability.

    Supply disruption

    These inflationary pressures are compounded by logistical challenges stemming from instability in the Strait of Hormuz. As a critical artery for regional imports, any disruption has ripple effects across the construction supply chain – particularly for long-lead items such as specialised façade systems, high-end finishing materials and key MEP components.

    While the UAE has leveraged overland routes to mitigate some of these bottlenecks, the shift is unlikely to be cost-neutral or time-neutral.

    Insurance gaps

    Legal and contractual frameworks governing projects are now under increased scrutiny. A key concern is the limitation of standard insurance policies. Many contractor all-risk and logistics policies exclude coverage for losses arising from active conflict, creating a significant gap for goods in transit.

    As freight is rerouted to alternative ports and transported over longer distances by road, insurers are becoming increasingly reluctant to provide cover for these extended journeys.

    Contractors are being advised to adopt a more disciplined approach. To recover costs linked to these disruptions, the industry is being urged to move away from the broad claims that have historically characterised regional disputes.

    Employers are unlikely to accept claims that do not clearly distinguish conflict-related impacts from pre-existing project delays. Instead, contractors must precisely document separate heads of claim, including supply chain cost increases, on-site stoppages, and new health and safety requirements.

    Market outlook

    In the longer term, the sector is in a wait-and-see phase. The market’s trajectory will depend heavily on the government’s ability to manage public finances following a period of significant, unforeseen expenditure.

    The cost of defence, combined with reduced tourism revenue, lower oil exports and weaker consumer spending, has created a complex and as yet undetermined fiscal challenge.

    Although construction is likely to be used as a tool for economic stimulus once the conflict subsides, the availability of capital for major new projects remains unknown. Government spending priorities will likely shift towards resilience, including accelerated infrastructure development on the UAE’s east coast.

    Fujairah and the Sharjah enclave of Khor Fakkan – both located outside the Strait of Hormuz – are expected to play an increasingly central role in strategic infrastructure planning. Over the next decade, investment may focus on strengthening the logistics and industrial capacity of these ports to better shield the federation from future geopolitical shocks.

    For the private real estate sector, the outlook depends on whether the attacks that began on 28 February have permanently altered the UAE’s reputation as a secure, low-tax safe haven. While the conflict is testing investor confidence, the country’s operational resilience may still compare favourably with challenges in other global markets.

    If the risks are viewed as manageable, investment could rebound quickly. However, prolonged uncertainty would result in a slower recovery. By early April, warning signs had already emerged, with some developers facing cashflow pressures due to slowing sales.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16267286/main.gif
    Colin Foreman
  • Firms win $932m Saudi canine training PPP project

    6 April 2026

     

    A consortium led by Bahrain-headquartered firm Lamar Holding has been selected for an estimated SR3.5bn ($932m) contract to develop canine training facilities in Jeddah and Dammam, known as the K9 Training Centre and Point of Entry (PoE) project.

    The other members of the consortium are Saudi Arabia’s Safari Holding and US-based firm MSA.

    US-based firm Synergy Consulting is the project’s financial advisor.

    The scheme is being developed through a public-private partnership (PPP) model by Saudi Arabia’s Zakat, Tax & Customs Authority (Zatca), in collaboration with the National Centre for Privatisation & PPP (NCP).

    The firms submitted the bids for the project on 14 July last year, as MEED reported.

    The project will be developed on a design, build, finance, operate, maintain and transfer basis, with a contract duration of 21.5 years, including the construction period.

    The scheme involves the development and operation of the National K9 Training Centre, including new facilities at King Abdullah Port in King Abdullah Economic City, Rabigh governorate, and at King Abdulaziz Port in Dammam.

    The scheme also includes the expansion of existing facilities at Jeddah Islamic Port and facilities maintenance services for all three sites.

    According to the official notice, the contract also covers dog training and other services, such as food, equipment, veterinary care and accommodation.

    The services will be provided at 34 PoEs in the kingdom, 26 of which are currently operational. Eight new facilities are expected to be completed by 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16267287/main.jpg
    Yasir Iqbal
  • Acwa solar plants face power output restrictions

    6 April 2026

    Acwa has announced that two of its solar independent power producer (IPP) plants in Saudi Arabia have been subject to temporary power dispatch limitations following instructions from the grid operator.

    According to the developer, the grid operator cited alleged reactive power fluctuations affecting grid stability. Acwa said both project companies deny the allegations.

    The affected assets are the 1,425MW Al-Kahfah solar photovoltaic (PV) IPP and the 2,000MW Ar Rass 2 solar PV IPP.

    Saudi Arabia’s Water & Electricity Holding Company (Badeel) and Acwa, formerly Acwa Power, signed power-purchase agreements with Saudi Power Procurement Company (SPPC) for the development and operation of the plants in 2023.

    Ishaa Energy Renewable Company and Nawwar Renewable Energy Company are the project companies specially set up to manage the Al-Kahfah and Ar Rass 2 projects, respectively. Both were set up as joint ventures between Acwa and Badeel.

    Al-Kahfah received its commercial operation certificate in November 2025. The plant has been under dispatch limitation since 12 December 2025, with partial dispatch permitted since 11 February 2026.

    The accumulated estimated revenue challenged by the principal buyer at Al-Kahfah up to the end of March is approximately SR95m ($25.3m).

    Ar Rass 2 received its initial commercial operation certificate in September 2025. It has been under dispatch limitation since 16 January 2026, with partial dispatch permitted since 8 March 2026.

    The accumulated estimated revenue challenged by the principal buyer at Ar Rass 2 up to the end of March is approximately SR73m ($19.7m).

    Acwa said both project companies have challenged the matter and are conducting detailed technical assessments, including independent third-party analysis. The company said it is also coordinating with the relevant authorities to enable the full restoration of plant operations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16267226/main.jpg
    Mark Dowdall