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  GCC banks prove resilient amid turmoil

  27 July 2026

  

   

  Gulf banks are proving adept at navigating the economic and geopolitical turbulence that comes with operating in the region. These skills have come to the fore this year, as regional lenders draw on stable funding profiles and ample capital and liquidity buffers that protect them from near-term credit risks. 

  GCC banks’ fundamentals have proved remarkably resilient to the Iran-related turmoil, assuming the intensity of the February-April stage of the military conflict does not resume.

  There have not been any significant outflows of external funding. While anecdotal evidence suggests some depositors briefly moved funds out of the region at the start of the war, ratings agency S&P Global notes that their return reflects confidence that the war will prove short-lived.

  Funding strength

  Metrics for the early part of the year revealed a robust picture. Domestic deposits held up strongly in the first quarter of 2026, total GCC domestic deposits rising by 16.9% in year-on-year terms, compensating for the decline in interbank funding. 

  State-linked deposits grew at a particularly rapid pace, led by the UAE and Kuwait, which offset decelerating private-sector deposit growth in those countries. 

  Domestic deposits accelerated in April, a pointer to GCC governments’ proactive stances in shielding their banking systems from undue stress. The inflow of public deposits accelerated quite significantly in this period, although that pace will likely subside as conditions gradually normalise. 

  Such deposits continue to underpin GCC banks’ wider performances. “Funding and liquidity is generally a strength for the region. Government deposits typically make up 20%-30% of the banking sector deposits. That is really important as these are sticky deposits,” says Redmond Ramsdale, head of Middle East ratings at Fitch Ratings.

  Funding and liquidity is generally a strength for the region

  Gulf states’ heavy reliance on public sector and government-related deposits has proved valuable in the current environment, anchoring banks’ funding profiles and helping reduce potential risks.

  Fund outflows have not materialised to any significant degree. “We had some anecdotal evidence of funds being withdrawn, but they returned in the following weeks,” says Ramsdale.

  Solid fundamentals

  GCC banks entered the conflict period in strong shape. According to S&P, domestic private sector credit growth in the region remained robust in the first quarter – the annualised growth rate was 8% at the end of March. 

  Core capital buffers are about 15%-16% – higher still for the top lenders – ensuring total loss-absorbing capacity stays below 9% of equity. Regulatory ratios exceed relevant thresholds, providing a significant buffer, according to ratings agency Moody’s.

  “If you look at the whole region, the proportion of the lending book that is non-performing, on a weighted average basis, sits around 2%,” says Badis Shubailat, a senior analyst at Moody’s. 

  “Against this solid level of asset quality, you have a cushion of provisions for expected losses that more than covers the existing stock of problem loans, which provides a strong first line of defence.”

  Then, as a second line of defence, are core capital buffers that remain high by global standards, with levels around 15%-16%. Put together, this explains why the banks are sitting on comfortable positions in terms of loss-absorption capacity.

  At the end of Q1 2025, the top 45 GCC banks reported an average Tier 1 capital ratio of 17%, with coverage ratios of 155.8%, according to S&P. 

  “Credit losses are at historical lows of 50 basis points (bps) for the region, and there are very good provisioning buffers – all of which helps to mitigate the negative consequences of the expected asset quality deterioration,” says Tatjana Lescova, director and lead analyst at S&P.

  According to Shubailat, the fact that the conflict impact on GCC banks has not been as pronounced as on other sectors reflects that over the past three years – and until right before the conflict started – the region as a whole, and its banking systems, had demonstrated remarkable resilience. In contrast, major advanced economies were struggling with inflationary pressures and subdued economic growth. 

  “This was visible in Saudi Arabia and the UAE, the two largest economic diversification engines in the region, which happen to also represent more than two-thirds of total banking system assets,” says Shubailat.

  Limited exposure

  Gulf banks have also been helped by the fact that those economic sectors most impacted by conflict – tourism, hospitality, energy – do not generally form a large part of their collective loans books. 

  “There will be weaker performance of borrowers in the most obvious affected sectors like infrastructure, tourism, logistics, transport and real estate, but tourism is actually a pretty small exposure for the banks – less than 3% of loan books,” says Ramsdale. “There might be a bit of pressure on small and medium-sized enterprises (SMEs), which are less able to cope with the pressures than the larger corporates, but again, for banks, SME lending is not very big.” 

  Banks’ exposure to the real estate and construction sectors is highest in Qatar – 31% of total credit at the end of March – while the exposure in Kuwait stands at 25%, with Saudi Arabia at 16% and Bahrain at 12%, notes S&P. UAE banks have been consistently reducing their exposure to these sectors, down to 13% at the end of March, compared to 21% at year-end 2020. 

  Moody’s Shubailat says that developers in the UAE sit on solid balance sheets and strong revenue backlogs, while banks’ exposure to the construction sector has declined. “So the quantum is lower, the credit quality of the exposure is better, and the banks are sitting on higher capital and provisioning buffers,” he notes.

  Gulf bankers are not resting on their laurels. They know that even if bad loans have been limited, they cannot forestall the possibility of problem exposures further down the road. 

  “Asset quality deterioration is a risk that we expect to materialise later in the year. This is because of weaker macro expectations, and negative impact on some of the corporate sectors, albeit varying across different GCC countries,” says Lescova.

  On average, for the region, S&P expects 20 bps of increases in credit losses for this year. When it comes to asset quality, the regulatory forbearance measures announced by three central banks will help alleviate the impact.

  Policy support

  Central bank moves have added another layer of support. Forbearance measures from the UAE, Kuwait and Qatar central banks have allowed additional headroom.

  For example, in mid-March, the Central Bank of the UAE launched a five-pillar resilience package that relaxed capital buffer stipulations, representing more than $272bn in support. 

  Kuwait eased liquidity requirements, raised maximum lending limits and released a portion of the capital conservation buffer to expand refinancing and credit quality absorption capacity. Qatar, meanwhile, has cut the reserve requirement from 4.5% to 3.5% for deposits.

  Forbearance measures from the UAE, Kuwait and Qatar central banks have allowed additional headroom

  Such measures were not a response to a banking crisis, says Ramsdale. “Some of the support packages that we have seen coming out of the central banks, in the UAE, Qatar and Kuwait, were preventative support measures,” he says.

  “They were designed to boost confidence and limit that pass through from temporary deposit volatility. It was not to do with acute banking stress.”

  Market confidence

  Larger banks are better positioned to cope with straitened economic times. They are generally more geographically diversified beyond their domestic markets, and international operations have historically been a growth driver for them. 

  “When there is increased market uncertainty, larger banks may benefit from a flight-to-quality movement, with deposits moved away from smaller banks. Based on Q1 results, only a few smaller banks have reported a contraction in the customer deposits,” says Lescova.

  The GCC’s largest banks, including Al-Rajhi Banking & Investment Corporation, Saudi National Bank, First Abu Dhabi Bank, Qatar National Bank, Abu Dhabi Commercial Bank and Emirates NBD, remain highly profitable, although they may not perform as strongly as they would have had the conflict not occurred.

  “We already expected some softening in profitability before the conflict, because of the normalisation of the cost of risk upwards from incredibly low levels over the last three years, [which] were driven by a very strong recovery performance from the banks,” says Shubailat. 

  “In turn, this current situation adds a layer of pressure to the normalising profitability story by increasing provisioning needs in light of the recent economic shocks,” he adds.  

  Confidence in GCC banks was evident from the outset of the conflict. In early April, Emirates NBD priced a $750m AT1 capital issuance, the first international debt capital markets transaction by a GCC issuer since late February.

  “The first ceasefire saw things like private placements start happening again, and that slowly translated into the opening up of public markets. 

  “Emirates NBD was one of the first banks to open up that market, and we are seeing the largest banks issuing again,” says Ramsdale.

  The operating environment for Saudi Arabia is ranked BBB+ – a strong position, all things considered. Ramsdale notes that Riyadh’s reprioritisation of large projects associated with Vision 2030 “means growth will probably be slightly slower in Saudi Arabia”, but adds: “That is actually a good thing, because growth was so strong it was beginning to pressure funding, liquidity and capitalisation. 

  “Taking off some of that pressure is a positive for banks.”

  Growth prospects

  Stronger earnings performances will allow banks to bankroll mergers and acquisitions (M&A), building on inorganic routes to growth. Within the past year, the National Bank of Bahrain and Bank of Bahrain & Kuwait (BBK) have agreed to explore a merger, while BBK has also absorbed HSBC’s retail banking business.

  Emirates NBD is reported to be looking to acquire HSBC’s business in Turkiye, a country where the Dubai bank already has a presence through its takeover of DenizBank in 2019. It also grew its stake in India’s RBL Bank this year to 60%. 

  “Certainly the big banks will remain opportunistic over M&A – where the value comes at the right price, then they are interested. And if the big international banks are going to pull out, they tend to have some of the best-quality assets, so you can understand why regional players might be interested in them,” says Ramsdale.

  Such moves should provide reassurance that, despite recent challenges, GCC banks are well placed to ride out the remainder of 2026 and resume the positive trajectory  that was evident before the Iran war shook the region. 

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  James Gavin
• 
  Contractor wins The Chedi residences Dubai contract

  27 July 2026

  Dubai-based firm Ancient Builders Constructions has won a contract to build The Chedi Private Residences, located in the Barsha Heights area near Sheikh Zayed Road.

  The contract was awarded by local developer Al-Seeb Real Estate Development.

  The project comprises a 250-metre-tall, 44-storey tower and will offer about 117 residential units upon completion.

  Enabling works are under way and are being undertaken by local firm Soiltec Piling & Foundation.

  Dubai-based High Art Engineering Consultancy is the project consultant.

  Local architectural firms Bruno Guelaff and BG Group are the project designers.

  Construction is expected to be completed by 2029.

  Al-Seeb Real Estate Development’s latest contract award in the UAE market comes amid heightened real estate activity in the construction sector. Schemes worth more than $323bn are in the execution or planning stages, according to UK-based analytics firm GlobalData.

  GlobalData forecasts that output from the UAE’s residential construction sector will grow by 3% in real terms over 2026-29, supported by infrastructure, energy and utilities developments, as well as residential construction projects.

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  Yasir Iqbal
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  Saudi Arabia issues RFP for Group 2 bess projects

  27 July 2026

  

   

  Saudi Arabia’s principal buyer, Saudi Power Procurement Company (SPPC), has issued the request for proposals (RFP) for the second phase of its independent battery energy storage system (bess) projects in Saudi Arabia.

  The Group 2 programme comprises six independent storage provider (ISP) projects with a total capacity of 3GW, equivalent to 12,000 megawatt-hours based on a four-hour storage duration.

  According to a source, the RFP was issued earlier in July and developers have since submitted a first round of clarification requests to SPPC as they prepare their bids. 

  Developers have until October to submit proposals, the source said.

  The six bess projects include:

  • Samha bess ISP: 500MW (Qassim)
  • Al-Leeth bess ISP: 500MW (Mecca)
  • Al-Henakiyah bess ISP: 500MW (Medina)
  • Khulis bess ISP: 500MW (Mecca)
  • Sadawi bess ISP: 500MW (Eastern Province)
  • Ashyrah bess ISP: 500MW (Mecca)

  On 1 July, MEED reported that up to 27 firms had prequalified to participate in the second phase. SPPC previously received statements of qualification on 13 May.

  It is understood that Abu Dhabi National Energy Company (Masdar, UAE), Acwa (Saudi Arabia), EDF (France), Korea Electric Power Corporation (Kepco, South Korea), International Power (Engie, France) and Marubeni Corporation (Japan) are among the companies likely to make offers for the contracts.

  Winning bidders will hold 100% equity in a special purpose vehicle (SPV), with each SPV entering into a storage services agreement with SPPC as part of the independent storage provider structure. 

  The programme forms part of Saudi Arabia’s National Renewable Energy Programme (NREP) and supports the kingdom’s target of generating about 50% of its electricity from renewable energy by 2030. The projects will be developed under a build-own-operate model.

  US/India-based Synergy Consulting is advising SPPC on the energy storage Group 1 and Group 2 programme.

  Contracts are expected to be awarded for Group 1 Bess projects in the coming months, with both Acwa and Engie understood to be frontrunners for these contracts.

  Separately, SPPC has extended the deadline for developers bidding for four solar projects under round seven of the NREP, led and supervised by the Ministry of Energy.

  The deadline for the four solar photovoltaic independent power producer (IPP) projects with a combined capacity of 3,100MW has been extended to 30 August.

  The deadline for the two wind IPPs with a combined capacity of 2,200MW has been extended to 14 September.

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  Mark Dowdall
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  Dubai opens major road bridge

  27 July 2026

  Dubai’s Roads & Transport Authority (RTA) has opened a new bridge under the Oud Metha and Al-Asayel streets development project, which is part of the wider Sheikh Rashid Corridor development project.

  According to the RTA, the three-lane bridge has the capacity to accommodate more than 3,600 vehicles an hour.

  It will serve traffic travelling from Al-Khail Road to Al-Asayel Street via Al-Wasl Club Street.

  The RTA said the project is 90% complete overall, with two tunnels scheduled to open in August.

  “The first tunnel will connect the service road on Oud Metha Street to the Sheikh Rashid Road intersection for traffic heading towards Bur Dubai, while the second will serve traffic coming from Dubai-Al-Ain Road towards Al-Wasl Club Street,” the statement added.

  The RTA will also open a new bridge for left-turn movements for traffic travelling from Al-Asayel Street to Oud Metha Street.

  In November 2024, MEED exclusively reported that Beijing-headquartered China Civil Engineering Construction Corporation (CCECC) had started mobilisation works on the project.

  The RTA awarded CCECC the AED600m ($163m) contract in October of that year.

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  Yasir Iqbal
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  Firms submit Jebel Ali sewage PPP prequalifications

  24 July 2026

  

   

  Dubai Municipality received statements of qualification on 23 July from firms interested in delivering phase three of the Jebel Ali sewage treatment plant (STP) expansion project.

  Known as DS150/3, the project will be delivered under a public-private partnership (PPP) model on a design, build, finance, own, operate and transfer basis.

  The project involves the development of a new water resource recovery facility with an ultimate treatment capacity of up to 1 million cubic metres a day (cm/d).

  It is being procured through Dubai Municipality’s sewerage and recycled water projects department and will be delivered via a two-stage operational approach over a 30-year concession period.

  It is understood that the following firms are among those likely to qualify for the project:

  • Acciona (Spain)
  • Alkhorayef (Saudi Arabia)
  • Besix (Belgium)
  • Etihad WE (UAE)
  • GS Inima (Spain)
  • Metito (UAE)
  • Miahona (Saudi Arabia) 
  • Samsung E&A (South Korea)
  • Saur (France)
  • Suez (France)
  • Taqa Water Solutions (UAE)
  • Veolia (France)

  The municipality issued a request for qualifications notice in May with an intial bid submission deadline of 18 June. UK-headquartered Deloitte is acting as financial adviser, Aecom is the project's technical adviser and CMS is the legal adviser.

  Dubai Municipality said the project will also include additional land uses and community-focused amenities as part of broader sustainability and urban integration objectives.

  Phase one and two expansion

  On 9 July, firms submitted bids for an engineering, procurement and construction contract covering the expansion of the Jebel Ali STP phases one and two.

  Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d, following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

  The upgraded facility will be capable of treating an additional sewage flow of 100,000 cm/d, with the expansion estimated to cost $300m.

  UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

  ---

  READ THE JULY 2026 MEED BUSINESS REVIEW – click here to view PDF

  Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

  Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:

  > AGENDA: Gulf aviation ambitions face uncertain future > AIRPORTS: Dubai and Riyadh reaffirm airport ambitions > MARKET FOCUS: Levant recovers in three speeds  > INDUSTRY REPORT: Dubai eyes tourism sector recovery > INTERVIEW: EtihadWE prepares roadmap for future projects  > PROJECTS MARKET: Mena project momentum holds despite conflict  > DATA CENTRES: Big Tech falls short on data centre promise > SAVINGS: Retirement creates multibillion-dollar opportunity for region   > LEADERSHIP: Aramco’s citizen developers accelerate digital change

  To see previous issues of MEED Business Review, please click here

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  Mark Dowdall