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
  • Diriyah tenders conference and exhibition centre

    4 November 2025

     

    Saudi Arabia’s gigaproject developer Diriyah Company has issued a tender inviting contractors to bid for the construction of a conference and exhibition centre in the second phase of the Diriyah project.

    MEED understands that the main contract tender was issued in October.

    Technical bids are due on 9 November, while commercial bids must be submitted by 17 December.

    The project covers an area of 29,000 square metres in Diriyah’s Northern Community.

    The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.

    This year, the company has awarded several main construction contracts worth over SR18bn ($5bn).

    Just days after Webuild announced that it had won the $600m contract for package three of the Diriyah Square project, Beijing-headquartered China Harbour Engineering Company won a SR5.7bn ($1.5bn) contract to build the Arena Block assets in the Boulevard Southwest section of the second phase of the Diriyah Gate development (DG2).

    In April, Diriyah awarded an estimated SR4bn ($1.1bn) contract for a utilities relocation package for the King Saud University project located in DG2. The contract was awarded to a joint venture of Beijing-headquartered China Railway Construction Corporation and China Railway Construction Group Central Plain Construction Company.

    Earlier in the same month, a SR5.1bn ($1.3bn) construction deal was awarded to a joint venture of local firm El-Seif Engineering & Contracting, Beijing-headquartered China State Construction Engineering Corporation and Qatari firm Midmac Contracting to build the Royal Diriyah Opera House.

    Also in April, a consortium of Saudi Arabia-based contractors Almajal Alarabi and Man Construction won an estimated SR915m ($244m) contract to build King Salman Grand Mosque in Diriyah.

    Once complete, Diriyah will have the capacity to accommodate 100,000 residents and visitors.

    READ THE NOVEMBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Mena players up the ante in global LNG production race; Investment takes UAE non-oil economy from strength to strength; Project finance activity draws international lenders back to market

    Distributed to senior decision-makers in the region and around the world, the November 2025 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15013053/main.jpg
    Yasir Iqbal
  • Bahrain unveils $17bn of new projects at Gateway Gulf

    3 November 2025

    Register for MEED’s 14-day trial access 

    Bahrain announced $17bn of new projects at the Gateway Gulf investment forum on 2 November.

    The investment pipeline matches the $17bn in foreign direct investment (FDI) the kingdom has successfully attracted since the first Gateway Gulf forum in 2018. The 2025 event includes 61 announcements and 33 signing ceremonies.

    In his keynote address, Sheikh Salman Bin Khalifa Al-Khalifa, the finance and national economy minister, said the GCC is no longer just a capital hub and is emerging as a centre of creativity, sustainability and technological excellence.

    In particular, he emphasised the role of artificial intelligence (AI) as Bahrain positions its economy for the future. “More profoundly, and perhaps even more transformational than the industrial revolution, we have entered the age of intelligence,” he said.

    He highlighted the shift of AI “from the margins to the core, shaping how factories operate, how banks serve their customers, how ports and logistics networks move goods around the world”.

    The new wave of investment projects aligns with this focus. At Gateway Gulf, Beyon Solutions and Bahrain’s Information and eGovernment Authority (iGA) signed an agreement to launch Bahrain’s first AI-ready Sovereign HyperCloud, built with Oracle Alloy. Hosted entirely in Bahrain, the platform provides secure, locally governed cloud and AI services for government and enterprises.

    Another announcement at Gateway Gulf on 2 November was the signing of a deal by steel producer Foulath Holding and Yellow Door Energy to develop a 123 MWp solar project under a power purchase agreement. It includes the world’s largest single-site rooftop plant at 50 MWp. The rooftop installation will feature 77,000 panels across a new 262,000-square-metre stockyard shed.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15004385/main.jpg
    Colin Foreman
  • L&T wins Tennet offshore contract after Petrofac termination

    3 November 2025

    India’s Larsen & Toubro (L&T) has been selected for the offshore electricity transmission contract that was previously awarded to UK-based Petrofac by Netherlands-based Tennet.

    Tennet’s termination of the contract with Petrofac led to the derailment of Petrofac’s planned restructuring and its subsequent collapse.

    At the time of the contract termination, Tennet said that Petrofac had not met contractual obligations.

    When it entered administration, Petrofac was actively working on projects in the UAE, Algeria, Kuwait and Bahrain.

    Its projects in the UAE were worth a total of $2.87bn and include an engineering, procurement and construction management contract awarded by Adnoc Gas in June.

    Now that L&T has been awarded the high-voltage direct-current (HVDC) offshore wind programme contract with Tennet, it will deliver HVDC converter stations in partnership with Hitachi Energy.

    This project is designed to facilitate the integration of extensive renewable energy sources into the European power grid, especially in the German and Dutch regions of the North Sea.

    READ THE NOVEMBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Mena players up the ante in global LNG production race; Investment takes UAE non-oil economy from strength to strength; Project finance activity draws international lenders back to market

    Distributed to senior decision-makers in the region and around the world, the November 2025 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15002009/main.jpg
    Wil Crisp
  • Dubai extends bid deadlines for key drainage projects

    31 October 2025

    Dubai Municipality has extended the bid submission deadlines for two key drainage projects under the $8bn Tasreef programme to develop, rehabilitate and expand Dubai’s stormwater drainage network.

    The first project, listed as TF-05-C1, involves a stormwater drainage system in Jebel Ali and the surrounding areas.

    The new deadline is 10 November, a source close to the project told MEED.

    The project covers approximately 27 kilometres of stormwater network and will serve major transport routes, including Sheikh Zayed Road and Al-Jamayel Road.

    The bid submission date for the tender, was initially 2 October before being extended to 30 October.

    The second project, listed under TF-11-C1,  is for the development of a stormwater pond, evacuation line and pumping station.

    The project includes a comprehensive stormwater drainage system, featuring a tunnel ranging from three to four metres in diameter along Dubai–Al Ain Road and the D54.

    The new deadline is 4 November.

    The bid submission date for the tender, was initially 25 September.

    The schemes are being procured by the municipality’s Sewerage and Recycled Water Projects Department as part of the Tasreef programme.

    In October, Dubai Municipality awarded contracts for two other major projects under the initiative.

    Local firm DeTech Contracting won the main contract for the construction of a stormwater drainage system on Sheikh Mohammed Bin Zayed Road and Al-Yalayis Road in Dubai.

    The municipality alos awarded a contract to Greece/Lebanon-based Archirodon for the construction of the Resilient Future Flow Outfall project. 

    The $25m project involves the construction of a 4-kilometre subsea pipeline with a 2-metre diameter and a discharge capacity of 9 cubic metres a second.

    The Tasreef masterplan that will serve key areas across the emirate, including Nad Al-Hamar, the vicinity of Dubai International airport, Garhoud, Rashidiya, Al-Quoz, Zabeel, Al-Wasl, Jumeirah and Al-Badaa. The initiative aims to expand Dubai’s rainwater drainage capacity by 700% by 2033.

    DeTech Consulting previously won the $136m contract to upgrade the West Deira stormwater system.

    This project was the first of the five planned Tasreef projects to enter construction, earlier this year.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14993856/main.jpg
    Mark Dowdall
  • Gas demand reshapes priorities

    31 October 2025

    Commentary
    Colin Foreman
    Editor

    Read the November issue of MEED Business Review

    Gas has increasingly been regarded as a crucial transition fuel over the past decade as governments race to cut carbon emissions and meet climate pledges – including the Paris Agreement’s aim to keep warming well below 2°C and pursue efforts to limit it to 1.5°C.

    Those commitments have driven the demand for liquefied natural gas (LNG) globally and this has reshaped investment priorities across the region, with Qatar, Oman and the UAE eyeing future export growth.

    QatarEnergy’s North Field expansion is the largest investment. The estimated $40bn programme will push Qatar’s LNG output towards 142 million tonnes a year by the end of this decade, almost doubling its present position and consolidating its role as a market anchor.

    Abu Dhabi is also committed to expanding its capacity. Its downstream strategies include a major greenfield LNG terminal at Ruwais, due to enter service in 2028 with two 4.8 million t/y trains adding 9.6 million t/y to the UAE’s export capability.

    These programmes are keeping contractors busy. Over the past five years, more than $44bn of LNG-related contracts have been awarded in the region – which is more than eight times the $5.3bn recorded in the previous five year period.

    At the same time, there are ample opportunities for contractors as other countries in the region build import infrastructure. Projects are already under way in Kuwait, Iraq, Jordan, Egypt, Algeria and Morocco – and more are expected.

    With base load concerns remaining for many countries when it comes to completely switching to renewables, gas is expected to be a fuel of choice for the decades to come. The investments made in production capacity mean the region will play a pivotal role in delivering the world’s energy needs.

    READ THE NOVEMBER 2025 MEED BUSINESS REVIEW – click here to view PDF

    Mena players up the ante in global LNG production race; Investment takes UAE non-oil economy from strength to strength; Project finance activity draws international lenders back to market

    Distributed to senior decision-makers in the region and around the world, the November 2025 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14992876/main.gif
    Colin Foreman