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
  • Israel ramps up gas exports to Egypt

    7 April 2026

    Israel’s gas flows to Egypt have returned to pre-war levels after restarting on 4 April, helping to ease the ongoing gas shortage in the North African country.

    Around 1.1 billion cubic feet a day is being transported by pipeline from Israel’s Leviathan and Tamar gas fields, according to a Bloomberg report.

    This is the same level that was being transported prior to Israel shutting down production from its offshore gas fields due to security concerns, and halting flows to Egypt on 28 February.

    Despite having its own gas reserves, Egypt is a net importer of natural gas and has been impacted by the surge in global prices since the US and Israel started their war with Iran.

    Last month, Egypt increased the prices of several petroleum products and natural gas for vehicles due to higher global energy prices.

    On 9 March, Egypt raised the price of natural gas for vehicles by 30% to E£13 ($0.25) a cubic metre.

    Egypt’s Petroleum & Mineral Resources Ministry said the increase was introduced due to “exceptional circumstances” resulting from geopolitical developments in the Middle East and their direct impact on global energy markets.

    It said that the regional conflict had led to a significant increase in import and domestic production costs.

    Egypt, the Middle East and North Africa region’s biggest liquefied natural gas (LNG) importer, is facing uncertainty over its LNG supplies in the coming months.

    Between March 2025 and February 2026, Egypt imported 9,440 kilotonnes of LNG, with the majority purchased under short-term agreements, mainly with third parties such as trading houses.

    Last year, it was reported that Egypt had signed deals for around 150 cargoes through to the summer of 2026.

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

    Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

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

    > GCC CONTRACTOR RANKING: Construction guard undergoes a shift
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16280784/main.jpg
    Wil Crisp
  • Egypt gas sector activity surges amid regional conflict

    7 April 2026

     

    There is a surge of activity in Egypt’s gas sector as investors pour money into boosting domestic production and the country makes deals to leverage its existing liquefied natural gas (LNG) export infrastructure.

    The increase in activity has come as the disruption to shipping through the Strait of Hormuz continues to prevent the shipment of around 20% of the world’s LNG supplies to consumer nations.

    While Egypt remains a net importer of natural gas, its geographical position, significant gas reserves and existing infrastructure, including two LNG export terminals, mean it can potentially capitalise on the current supply crunch.

    Harmattan development

    On 6 April, Arcius announced the final investment decision (FID) to develop the Harmattan gas field offshore Egypt.

    Arcius is a joint venture between UK-based BP and the UAE’s Adnoc, focused on developing gas assets in Egypt and the wider Eastern Mediterranean.

    The company acquired the El-Burg offshore concession area, which includes the Harmattan field, in February.

    An engineering, procurement, installation and commissioning (EPIC) contract for the project has been awarded to Egypt’s Enppi, while Cairo-based Petrojet and Petroleum Marine Services (PMS) have been awarded work as subcontractors.

    In a statement, Naser Al-Yafei, the chief executive of Arcius, said: “The FID to develop the Harmattan field marks an important milestone in advancing one of our first projects in Egypt toward production.”

    Idku LNG

    UK-based Shell also held a meeting with Egypt’s Petroleum Minister Karim Badawi recently, with talks focusing on increasing domestic natural gas production and utilising the Idku LNG export terminal.

    The terminal has a nameplate capacity of 7.2 million tonnes a year, but is not currently operated at full capacity.

    The Idku facility is owned by a consortium of companies, with Shell and Malaysia’s Petronas holding the biggest stakes.

    Gas corridor

    On 30 March, Egypt signed a natural gas cooperation agreement with Cyprus, laying the groundwork for a regional gas corridor that will allow Nicosia to transport its gas to Egypt to use its export infrastructure.

    The signing ceremony took place on the sidelines of a conference in Cairo, where both parties agreed to cooperate on the development and exploitation of gas resources.

    The text of the agreement focused on technical and commercial aspects of the deal, establishing a basis for future negotiations.

    Under the agreed terms, Cyprus’ gas will be processed in Egypt’s liquefaction facilities before being shipped to export markets.

    The agreement built on a memorandum of understanding (MoU) signed in February last year, in which Egypt agreed to buy gas from Cyprus’ Aphrodite field.

    Block 6

    It is also expected that Italy’s Eni, which operates Cyprus’ Block 6 concession with France’s TotalEnergies, will announce FID for the development of the Kronos field in the coming weeks.

    The field has reserves of 3.1 trillion cubic feet and, under current plans, the field’s gas will be transported to Egypt via pipeline before being exported from Egypt’s Damietta LNG terminal.

    Future investment

    As a net importer of natural gas, Egypt faces short-term economic problems due to the current high-price environment, forcing the country to pay more for energy imports.

    While this is a major setback for the country and is likely to erode its foreign currency reserves over the coming months, the current global shortage of natural gas could lead to increased investment in the country’s oil and gas sector.

    This could accelerate existing project plans within the sector as well as the development of new projects.

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

    Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

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

    > GCC CONTRACTOR RANKING: Construction guard undergoes a shift
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16280782/main.jpg
    Wil Crisp
  • Adnoc Gas and Borouge facilities suffer Iranian attacks

    6 April 2026

    Debris from Iranian drones intercepted by the UAE’s air defence systems has caused damage at the Habshan gas processing facility operated by Adnoc Gas in Abu Dhabi, killing one person on site, as well as at the petrochemicals complex operated by Borouge.

    In a disclosure to the Abu Dhabi Securities Exchange (ADX) on 5 April, Adnoc Gas, a subsidiary of Abu Dhabi National Oil Company (Adnoc Group), said debris resulting from a successful interception by UAE air defences in the area caused damage to a limited number of facilities within the Habshan gas complex on 3 April.

    The incident resulted in the death of an engineer working at the facility for Egyptian contractor Petrojet during evacuation. Four other contractors sustained minor injuries and were discharged from hospital after receiving treatment.

    Specialised teams were immediately dispatched to isolate the affected area and begin a comprehensive assessment of the damage to the production line, which is ongoing, Adnoc Gas said.

    “We are profoundly saddened by the loss of life and extend our deepest condolences to the family and loved ones of the deceased. Our thoughts are also with the injured colleagues, and we wish them a full and speedy recovery. The safety, security and wellbeing of our people remains our highest priority,” Fatema Al-Nuaimi, CEO of Adnoc Gas, said in the filing.

    “We remain committed to delivering shareholder value. Our balance-sheet strength and capital discipline support the resilience of the company,” she added.

    Adnoc Gas further said it is meeting domestic demand in the UAE through other facilities, with no impact on customer supply. “The company continues to actively collaborate with international customers and partners where needed,” it said in its disclosure.

    The Habshan gas processing facility has been attacked at least twice in March during Iran’s ongoing war with Israel and the US.

    Borouge incident

    Authorities in Abu Dhabi reported fire damage at Borouge’s main petrochemical facility caused by fragments from a drone interception falling on the complex on 5 April. No injuries were reported, the Abu Dhabi Media Office said.

    “Production activity in affected areas has been suspended following the incident whilst damage assessment and repairs are carried out,” the company said in a filing with ADX on 6 April.

    The company also highlighted market conditions. “A global shortage of polyolefins is driving a strong recovery in prices in March, which has continued in April,” it said.

    Borouge said it remains financially positioned to manage near-term impact. “Borouge retains significant financial resilience to navigate short-term operational disruption due to its strong cash generation and significant available liquidity.”

    Borouge pointed to strong operating performance heading into the disruption. “In the first quarter of 2026, Borouge achieved high utilisation rates and was able to sell a significant proportion of its production during the month of March via alternative routes,” the statement said.

    ALSO READ: Sultan Al-Jaber calls Strait of Hormuz blockade “economic terrorism”
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16273020/main1639.jpg
    Indrajit Sen
  • Bapco Energies reports Iranian drone attack on facility

    6 April 2026

    Bahrain’s state energy conglomerate, Bapco Energies, said a fire broke out at one of its storage facilities following a drone strike, in the latest attack by Iran on the kingdom’s energy and industrial assets amid its ongoing war with Israel and the US.

    The tank fire, which resulted from the 5 April drone attack, has been fully extinguished and the situation is under control, Bapco Energies said.

    The state enterprise said the attack caused no injuries, adding that it is assessing the damage.

    “Emergency response teams acted immediately, working closely with the Civil Defence and relevant authorities to contain the incident and safeguard the site. The safety of our employees remains a top priority,” Bapco Energies said in its statement.

    This is understood to be at least the third major Iranian attack on a Bahraini energy complex, after Bapco Energies declared force majeure across its operations last month following two missile strikes on the Sitra oil refinery on 5 and 9 March.

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

    Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

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

    > GCC CONTRACTOR RANKING: Construction guard undergoes a shift
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16271286/main.jpeg
    Indrajit Sen
  • 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