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
  • Contractors compete for Riyadh airport Terminal 6 work

    2 November 2026

     

    Contractors are preparing bids for the main construction contract for Terminal 6 at King Salman International airport (KSIA) in Riyadh.

    MEED understands that the consortiums have been given until January to submit their proposals.

    The participating consortiums are:

    • Al-Gihaz Holding / TAV Construction / Webuild (local/Turkiye/Italy)
    • Modern Building Leaders / Powerchina / Metallurgical Corporation of China (loca/China/China)
    • UCC Holding / Consolidated Contractors Company (Qatar/Greece)

    Last month, MEED exclusively reported that contractor teams have completed the early contractor involvement phase of the project.

    Under the completed phase, the shortlisted teams submitted detailed construction methodologies and technical design proposals.

    King Salman International Airport Development Company (KSIADC) is a subsidiary of Saudi sovereign wealth vehicle the Public Investment Fund.

    Terminal 6 is planned to boost the airport’s annual capacity by 40 million passengers. KSIADC aims to complete the terminal ahead of Expo 2030 Riyadh.

    In May 2025, MEED reported that US-based Bechtel had been appointed as delivery partner for the passenger terminals at KSIA.

    UK-based Foster + Partners designed the masterplan, including the terminals, six parallel runways and a multi-asset real estate district.

    US-based engineering firm Jacobs is providing specialist consultancy services for the masterplan and runway design, while UK-headquartered Mace is acting as delivery partner for the broader development. Local firm Nera secured the airspace design consultancy contract.

    The KSIA project covers about 57 square kilometres (sq km) and incorporates the existing terminals at King Khalid International airport. The scheme will feature 12 sq km of airport support facilities, residential and recreational zones, retail assets and logistics parks.

    The development is targeted to handle up to 120 million passengers a year by 2030 and 185 million passengers by 2050, in addition to an annual cargo throughput of 3.5 million tonnes by 2050.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21087339/main.jpg
    Yasir Iqbal
  • Contractors prepare bids for Morocco power line

    2 November 2026

     

    Contractors are preparing bids for a 160-kilometre (km), 400kV transmission line linking Guercif and Fes East in Morocco, following a site visit on 1 October.

    The project is being developed by the Office National de l'Electricite et de l'Eau Potable (Onee) to connect the Saka solar photovoltaic power plant to the national electricity grid.

    According to sources, at least eight contractors attended the site visit last month, including:

    • Butec (Lebanon)
    • CEEC Northeast Electric No.2 (China)
    • Cegelec (France)
    • EPME Electric (Morocco)
    • Hideleco (Egypt)
    • Kec International (India)
    • PowerChina (China)
    • Transrail (India)

    The project comprises two lots. The first involves a 90km transmission line between Guercif and Taza, while the second covers a 70km section between Taza and Fes East.

    The scope of work includes the construction of tower foundations, installation of transmission supports and conductors, and associated high-voltage equipment. It also includes optical fibre cables for communications and monitoring, access roads and other supporting infrastructure.

    The tender was issued in September with bids originally due by 21 October. The deadline has now been extended to 25 November.

    The project is part of a wider programme by Onee to expand Morocco's electricity transmission network and accommodate additional renewable energy capacity.

    In June, the utility commissioned a 274km, 400kV transmission line linking Chemaia and Mediouna, near Casablanca.

    Onee plans to expand its high- and extra-high-voltage transmission network from more than 30,700km to 37,000km by 2030.

    In August, it approved a $26.4bn investment programme for the 2026-30 period, covering electricity and drinking water infrastructure.

    The programme has allocated about $21.9bn to electricity projects and $4.5bn to drinking water infrastructure, with about 72% of the investment to be financed by the private sector, according to Onee.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21083507/main1257.jpg
    Mark Dowdall
  • Adnoc Onshore allows more time for Bab gas cap well tie-in bids

    2 November 2026

     

    The onshore business of Abu Dhabi National Oil Company (Adnoc Onshore) has allowed contractors more time to prepare proposals for a project to tie in gas-producing and injection wells at the gas cap reservoirs of Abu Dhabi’s onshore Bab field.

    The well tie-in scope, estimated to be worth more than $800m, forms part of Adnoc Group’s wider integrated Bab gas cap development programme.

    The overall programme is being led and overseen by Adnoc Gas, another Adnoc Group subsidiary. Its central element is the construction of gas-processing infrastructure to handle incremental gas output expected from developing the Bab gas caps.

    Adnoc Onshore issued the main tender for engineering, procurement and construction (EPC) works on the project in late September, MEED previously reported.

    Contractors have been given until 16 November to submit technical bids for the project, according to sources. The previous deadline was 29 October.

    MEED previously reported that Adnoc Onshore issued an expressions of interest (EoI) notice for the Bab gas production and injector well tie-in project on 13 May, with contractors submitting responses by 20 May.

    The scope of work on the project covers the following:

    • Tie-in of 99 new wells from Bab gas cap reservoirs KH-2, SH-1 and LK-1 (60 gas producers and 39 gas injectors);
    • Installation of well gathering structures: 10 gas pads, six well bays and three virtual pads;
    • Installation of a gas gathering network and a gas injection network;
    • Rerouting of the LK-3 production from the existing trunkline in Remote Manifold Station 3 (RMS-3) to the project’s production trunkline, Bab Gas TL-2;
    • Demolition of the existing 10-inch trunkline from RMS-3 to onshore gas development phase one.

    In the EoI document, Adnoc Onshore said it intends to award the EPC contract in the last quarter of the year, with a 45-month duration of works.

    Bab gas cap project infrastructure

    As part of its 2030 upstream production increase goals, Adnoc Group is working to extract gas from four underdeveloped gas cap reservoirs at the Bab onshore field development – Thammama A, Thammama B, Thammama F and Thammama H.

    While the Thammama A, B and H reservoirs are estimated to collectively produce 1.45 billion cubic feet a day (cf/d) of gas, output from the Thammama F gas cap is expected to be at a rate of 396 million cf/d.

    Existing trains at the Habshan processing complex in Abu Dhabi will be unable to handle the new gas volumes. Therefore, Adnoc Gas is required to build new facilities to process an additional volume of up to 1.85 billion cf/d of raw gas.

    Adnoc Gas is planning to build a gas processing plant in the Bab area, about 170 kilometres from Abu Dhabi, along with associated pipeline networks and other ancillary units, as part of the broader Bab gas cap development project. It has divided the EPC scope of work on the project into four packages:

    • EPC package 1 – Main Bab gas cap plant
    • EPC package 2 – Early civil works
    • EPC package 3 – Pipelines
    • EPC package 4 – Non-process area works

    Abu Dhabi Securities Exchange-listed Adnoc Gas issued the tender for the main Bab gas cap plant on 25 June and set an initial deadline of 17 July for contractors to submit technical bids. The company then extended the technical bid submission deadline by four months, until 16 November, MEED previously reported.

    Following a reshuffle of the consortiums gearing up to bid for the main Bab gas plant EPC package, estimated to be worth more than $6bn, the following teams have formed to compete in the main contract tendering round:

    • Larsen & Toubro Energy Hydrocarbon (India) + Petrofac Emirates (UAE)
    • Technip Energies (France) + JGC Corporation (Japan) + Sinopec (China)
    • Tecnimont (Italy) + China Petroleum Engineering and Construction Corporation (CPECC)

    The other three packages of the Bab gas cap project are also in the main contract tendering stages.

    Prior to issuing the EoIs for the project packages, Adnoc Gas completed an early engagement process with contractors in September and October last year, as MEED previously reported.

    In December last year, Adnoc Gas awarded the front-end engineering and design (feed) works for the development project  to Australia-based consultancy Worley. The feed contract has a duration of more than 1.2 million man-hours, making it the largest-ever engineering job awarded by Adnoc Gas.

    Bab Gas Cap concession

    In addition to Adnoc Gas overseeing the main EPC tendering exercise for the gas processing plant, Abu Dhabi’s Supreme Council for Financial and Economic Affairs (SCFEA) awarded concession agreements in June for the development and production of the Bab gas cap reserve.

    Adnoc will hold the majority 60% participating interest in the concession. The remaining stakes will be held by France’s TotalEnergies (10%), the UK’s BP (10%), China National Petroleum Corporation International (8%), Japan Oil Development Company Onshore (5%), China ZhenHua Oil (4%) and Korea GS E&P (3%).

    According to the SCFEA, the Bab gas cap development and production concession represents the largest gas cap development project of its kind globally, the Abu Dhabi Media Office said in a report.

    A gas cap refers to the free natural gas that sits above an underlying oil reservoir – in this case, the Bab onshore oil field in Abu Dhabi.

    The project, operated by Adnoc Onshore, is expected to have a production capacity of approximately 1.5 billion cf/d of natural gas, equivalent to about 15% of Adnoc Gas’ total operational gas processing capacity.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21083343/main.jpg
    Indrajit Sen
  • Gulf ministers insist Hormuz is still essential

    2 November 2026

    Register for MEED’s 14-day trial access 

    Senior Gulf officials have rejected suggestions that new pipelines and rail links will allow the region to do without the Strait of Hormuz, arguing that the waterway will remain essential to the GCC and the global economy.

    Speaking at the Gateway Gulf investment forum in Manama on 1 November, GCC secretary-general Jasem Mohamed Albudaiwi said keeping the strait open is the responsibility of the international community, not of any one country or group of partners. "We hear some voices that maybe we should seek alternatives to Hormuz," he said. "Fine, we will get the pipelines. We will get the GCC railway. But that doesn't mean Hormuz is nobody's business."

    Albudaiwi called for the strait to remain open in line with international law, including the 1982 UN Convention on the Law of the Sea.

    Shipping through the strait has been severely restricted since the US and Israel launched strikes on Iran on 28 February and Iran retaliated with attacks on GCC states and commercial vessels.

    Bahrain's Finance & National Economy Minister, Sheikh Salman Bin Khalifa Al-Khalifa, said building redundancy makes sense, but treating the strait as dispensable does not. He said the waterway carries 30% of global liquefied natural gas (LNG) exports, 20% of aluminium exports and 30% of fertiliser exports. "Any thinking about the alternative of Hormuz, as in we won't need it, is illogical, because we will need it for the world economy," he said.

    UAE Economy & Tourism Minister Abdulla Bin Touq Al-Marri said that "Hormuz matters, and Hormuz will keep mattering", adding that an economy dependent on a single trade route is exposed if that route closes.

    Sheikh Salman said the crisis has compressed years of GCC customs negotiations into weeks. During the conflict, containers cleared at Jeddah with final destinations in Bahrain or Kuwait moved on without further checks, and the same applied to cargo routed through Salalah and Fujairah, he said. GCC ministers have since agreed to make these emergency measures permanent.

    He also cited Gulf Air operating out of Saudi airports for more than 40 days without a written agreement, and a $5bn swap between the UAE and Bahraini central banks to stabilise currencies.

    Bin Touq said the bloc should use 2027 and 2028 to push through reforms, including removing remaining customs barriers between member states.

    Albudaiwi said GCC leaders meeting in Jeddah on 28 April had tasked the secretariat with advancing water connectivity, expanding the GCC electricity grid, planning new logistics infrastructure including ports, accelerating the GCC railway and enhancing oil and gas pipeline links.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21080732/main4958.jpg
    Colin Foreman
  • Bahrain’s Gateway Gulf brings $20bn of deals

    2 November 2026

    More than 110 announcements worth over $20bn will be made at the Gateway Gulf Investment Forum in Bahrain, according to the country's finance minister.

    "Over the next two days at Gateway Gulf, more than 110 announcements worth over $20bn will be made," Sheikh Salman Bin Khalifa Al-Khalifa, Finance & National Economy Minister, said at the opening of the forum's fourth edition on 1 November in Bahrain.

    He said the announcements will cover new partnerships, investments, projects and jobs. Sheikh Salman addressed an audience that included Bahrain's Crown Prince and Prime Minister, Prince Salman Bin Hamad Al-Khalifa.

    The minister said the region's economies have been "tested as never before" since the previous edition of the forum a year earlier.

    "In the face of unprecedented attacks, we did not waver," he said. He added that Bahrain has chosen to work more closely with its allies and partners to defend what it has built.

    Sheikh Salman said the Gulf economy has grown to $2.4tn in GDP. Non-oil sectors account for more than 86% of Bahrain's GDP and more than 77% across the Gulf, he said.

    He said Gulf banks hold more than $4tn in assets, while the region's sovereign wealth funds manage more than $5tn of investments. "These numbers describe a region that has chosen to build a more stable, a more prosperous future for its people," he said. "Bahrain is the gateway to that region."

    The minister said Bahrain is focusing on regulation, infrastructure and people to attract investment.

    He said the country has developed a regulatory framework over several decades that is "clear, modern and fast", allowing investors to commit with confidence.

    On infrastructure, he highlighted logistics, connectivity, digital networks and industrial land as areas where Bahrain is building the foundations for businesses to expand. He also named finance, logistics, tourism, manufacturing, technology and telecommunications, and oil and gas as the sectors into which he expects domestic, regional and international capital to flow.

    He said the investments will create jobs for young graduates and support the growth of family businesses.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21080593/main2015.jpg
    Colin Foreman