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
  • Daewoo pulls out of Libya upstream tender

    3 March 2026

     

    South Korea’s Daewoo has pulled out of the tender process for Libya’s 6J North Gialo oil field development project, increasing uncertainty over its future, according to industry sources.

    Daewoo had formed a partnership with Egypt’s Petrojet to participate in the tender process.

    The only other company to submit a bid for the project was UK-based Petrofac, which filed for administration in October last year.

    In September last year, MEED revealed that two bids had been submitted for the project and were under evaluation.

    Contractors now believe that the client on the project, Libya’s Waha Oil Company, may cancel the existing tender and retender the project due to problems with the two bidders.

    Waha is a joint venture of Libya’s National Oil Corporation (NOC), France’s TotalEnergies and US-based ConocoPhillips.

    The 6J North Gialo field development project is part of a series of tenders that are collectively expected to be worth $1bn.

    The three projects are:

    • NC98
    • Gialo 3
    • 6J North Gialo

    All three projects will develop Libyan reservoirs that have not yet been tapped.

    The 6J North Gialo project was the first to be tendered and it is expected to be followed by NC98, with the Gialo 3 project likely to be tendered last.

    Together, the projects are expected to double Waha’s production from about 300,000 barrels a day (b/d) of oil to 600,000 b/d. The Waha concession covers 13 million acres.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15836218/main.png
    Wil Crisp
  • Iraq oil field stops production due to Israel-Iran conflict

    3 March 2026

    The Shaikan field in northern Iraq’s semi-autonomous Kurdistan region has stopped production due to security concerns related to the US and Israel’s conflict with Iran.

    The field is operated by London-listed Gulf Keystone Petroleum, which has said in a statement that it had “temporarily shut-in production operations and has taken measures to protect staff in light of the developing regional security environment”.

    The company also said that it was closely monitoring the situation and would provide updates as appropriate.

    Shaikan is one of Iraqi Kurdistan’s largest producing fields and produced more than 41,500 barrels a day in 2025.

    The production stoppage at Shaikan comes days after gas production was halted at Iraqi Kurdistan’s Khor Mor field on 28 February.

    UAE-based Dana Gas stopped supplying power plants from the field due to the “abnormal situation and war taking place in the area”, according to a joint statement from the Kurdistan region’s natural resources and electricity ministries.

    The gas halt is expected to cut electricity generation capacity by 2,500-3,000MW, with authorities seeking alternative supply to limit the shortfall, the ministries said.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15836217/main.png
    Wil Crisp
  • Saudi Arabia’s private sector picks up the baton

    2 March 2026

     

    Ten years of ambitious construction project launches ended on 25 January 2026, when the Olympic Council of Asia and the Saudi Olympic & Paralympic Committee released a joint statement saying that they had agreed to indefinitely postpone the 2029 Asian Winter Games. In early February, it was announced that Almaty in Kazakhstan will host the event.

    The Trojena mountain resort at Neom in northwest Saudi Arabia was selected in 2022 as the venue for the games, and despite significant construction work on the project, rumours had been circulating throughout most of 2025 that the greenfield venue would not be ready by the 2029 deadline.

    Project reprioritisation

    Trojena is not the only project in the kingdom that has been subject to scrutiny. There have been reports of other projects, including The Line and the Mukaab, either being scaled back, delayed or put on hold as Riyadh reassesses its priorities. This has created an air of uncertainty over Saudi Arabia’s upcoming project pipeline.

    Speaking at the Private Sector Forum (PSF), held in Riyadh in early February, Khalid Al-Falih, then Saudi Arabia’s investment minister and now minister of state, said that much has changed since Vision 2030 was launched in 2016, and that this has naturally warranted a reprioritisation. 

    Al-Falih, who also sits on the Public Investment Fund’s (PIF’s) board of directors, said that with Saudi Arabia having been chosen to host football’s Fifa World Cup in 2034 and Expo 2030 Riyadh – and as the global economy is evolving rapidly with the rise of artificial intelligence (AI) – some projects such as The Line at Neom have slowed down. However, other projects related to the World Cup, Expo 2030, technology and AI have accelerated. 

    PIF strategy

    In his speech at the PSF, Yasir Al-Rumayyan, governor of the PIF, also alluded to changing priorities and said that this is a pivotal moment for Saudi Arabia’s economy. 

    Launched in 2016, Saudi Arabia’s Vision 2030 is described as “a transformative and ambitious blueprint to unlock the potential of its people and create a diversified, innovative and world-leading nation”. 

    The agency charged with delivering many of the objectives outlined in the strategy is the PIF. Established in 1971, it was moved from the Finance Ministry in 2015 to the Council of Economic & Development Affairs, where it was given a more active mandate. It then grew from a staff of about 50 in 2015 to almost 3,000 in 2024, according to the most recently published annual report.

    Over the past 10 years, the PIF has helped drive the development of key sectors with direct capital spending on projects. The Red Sea Project and the Qiddiya entertainment city development aim to position the kingdom as a leisure tourism destination, while Roshn’s portfolio of residential communities has helped transform the housing market.

    The PIF had $913bn of assets under management in 2024. Its activities are too varied to list, but they include developing the kingdom’s five official gigaprojects; holding investments in Saudi companies including Saudi Aramco and Maaden; owning stakes in electric vehicle manufacturers Lucid and Ceer, and gaming companies Nintendo and Electronic Arts; and owning UK Premier League football team Newcastle United.

    In 2026, the role of the PIF is changing. Speaking at the PSF, Al-Rumayyan extended an invitation to the private sector to play a bigger role in achieving the kingdom’s economic ambitions. 

    “Today, in line with the objectives of the third phase of Saudi Vision 2030 and the PIF’s strategy for the coming five years, we are moving from building sectors to integrating ecosystems, and from launching opportunities to accelerating growth – through an open invitation to the private sector to invest and partner in shaping a diversified and resilient economy,” he said.  

    Having raised the bar, PIF officials say that sectors such as tourism and real estate are now ready for the private sector to take over. They describe sectors reaching what they call ‘escape velocity’, which is the point where a sufficient level of maturity has been reached for the private sector to come in and take the lead.

    [In 2026, the PIF is] moving from building sectors to integrating ecosystems, and from launching opportunities to accelerating growth

    Financial considerations

    The decision to pass the baton to the private sector comes at a time when Saudi Arabia’s ability to finance all its project commitments directly has been questioned amid lower-than-desired oil prices. 

    Reflecting the constrained backdrop, the Ministry of Finance’s final budget statement for 2026 projects a deficit of SR165bn ($44bn), equivalent to about 3.3% of GDP. 

    The private sector has a tough act to follow. While the PIF has embarked on some of the world’s most ambitious projects in recent years, it has also introduced international standards that it hopes will lead to ways of doing business in Saudi Arabia that are more in tune with international best practices. 

    “The fund will continue to enable ecosystems and lay the foundations for growth. At the same time, the next phase requires a higher level of readiness and ambition from the private sector, alongside the ability to scale and innovate – a phase in which the role of the private sector evolves from execution to contributing to economic building and value creation,” Al-Rumayyan said. 

    Whether the private sector is ready to take over is the critical question in 2026. 

    According to PIF subsidiary development companies (devcos) that engage with private sector investors, the tide is turning. They say that five years ago, the appetite to invest was limited and devcos had to step in and deliver a greater proportion of project masterplans. As these investors complete their first projects, however, confidence is building.

     

    Deals signed

    This growing appetite could be seen at the PSF, where agreements were signed by private sector investors and devcos. 

    Rua Al-Madinah, which is responsible for Medina’s tourism and cultural development, signed a memorandum of understanding (MoU) with Indonesian sovereign wealth fund, Danantara Indonesia. It covers identifying and assessing investment opportunities in the Rua Al-Madinah and Dar Al-Hijrah projects.

    King Salman International Airport Development Company signed several MoUs with local firms to develop mixed-use projects within its airport masterplan. The agreements were signed with Sumou Holding, Mohammed Al-Habib Investment, Kinan, Ajdan, Retal, Urjuan and Osus and comprise residential, commercial, retail, hospitality, entertainment and other related projects.

    Roshn Group also signed an agreement with Kuwait’s Agility Logistics Parks to establish a joint venture that will develop a Grade A logistics hub.

    In mid-February, two further deals were signed. PIF-backed Smart Accommodation for Residential Complexes Company (Sarcc) signed an agreement with Dammam-based Tamimi Global Company to develop a 4,000-bed worker accommodation project in North Riyadh. The development is expected to cost over SR1.5bn ($400m).

    Sarcc also signed a separate agreement with Riyadh-based Mawref Company to develop another North Riyadh worker accommodation project. This deal involves building a 12,000-bed facility with a development cost of over SR669m ($178m). 

    The first phases of both projects are expected to be completed in 2029.

    While momentum continues to build and deals are signed, some private sector players remain to be convinced. In the kingdom’s real estate sector, for example, recent amendments to legislation, which include a white land tax and a rent freeze, have created a level of uncertainty that some potential investors say makes it difficult to sign off on investment commitments. 

    Much will depend on the success of the deals already signed. If these agreements result in positive outcomes, then the fear of missing out will kick in and other private sector players will be keen to invest. 

    The risk is that, should deals turn sour and fail to produce the expected results, then attracting future investments from the private sector will be challenging.

    Main image: Yasir Al-Rumayyan, governor of the PIF, inaugurates the PSF 2026. Credit: Saudi Press Agency 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15827282/main.gif
    Colin Foreman
  • Algiers moves on new railway project

    2 March 2026

     

    Algeria’s state railway company Agence Nationale d’Etudes et de Suivi de la Realisation des Investissements Ferroviaires (Anesrif) has formally started the procurement process for its multibillion-dollar Laghouat-Ghardaia-El-Meniaa railway project.

    International and local firms have been given until 8 March to submit expressions of interest for the overall client’s engineer role on the 495-kilometre-long railway development.

    Consultancies have also been given until 12 March for two separate contracts covering the project supervision and control of the first 265km-long element between Laghouat and Ghardaia, and the 230km-long line between Ghardaia and El-Meniaa.

    This Laghouat-Ghardaia section, which is estimated to cost about $1.4bn, will comprise 21 viaducts, one tunnel, 55 pipe crossings and five stations.

    The 230km-long Ghardaia to El-Meniaa second section will start at Metlili station and extend south to El-Meniaa. It will comprise six viaducts, 35 railway structures and three stations, and have an estimated total construction cost of about $1.2bn.

    The speed of passenger trains on the railway will be 220 kilometres an hour (km/h) and 100km/h for freight trains.

    The solicitations of interest for the construction of the two sections were originally scheduled for February, but to date have not been released.

    READ MORE: Algeria prepares 495km railway construction tender

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15826676/main.gif
    Edward James
  • Saudi developer Acwa names new CEO

    2 March 2026

    Saudi Arabia’s Acwa has appointed Samir J Serhan as CEO, effective 1 March 2026.

    Serhan joined Acwa, formerly Acwa Power, last year as president for Saudi Arabia and the Middle East. He previously served as chief operating officer of US-based Air Products, where he had global responsibility for operational business and project execution across the Americas, Asia, Europe, Africa, the Middle East and India.

    Earlier in his career, he was president of hydrogen at Praxair and held senior leadership roles at Linde Group in the US and Germany, including managing director of Linde Engineering.

    Outgoing CEO Marco Arcelli will remain as an adviser to the chairman to ensure continuity.

    Arcelli said: “Over the past three years, Acwa’s portfolio has doubled in size, and we are on track to double it again by 2030, scaling both our footprint and our impact. Acwa now produces around 25% of the world’s desalinated seawater.”

    He added: “We have expanded into new markets, including Azerbaijan, China, Kuwait and Senegal, while advancing energy export opportunities from Saudi Arabia.”

    Acwa recently extended its lead at the top of the GCC Water Developer Ranking, adding 265,925 cubic metres a day (cm/d) in net capacity from new contract awards in 2025.

    The biggest of these involves a contract to develop the Ras Mohaisen independent water plant, awarded by the Saudi Arabian state offtaker Sharakat, formerly Saudi Water Partnership Company.

    The project is located on the kingdom’s Red Sea coast and will have the capacity to treat 300,000 cm/d of seawater using reverse osmosis technology.

    MEED reported last September that Acwa’s net power generation capacity in the GCC was 28.1GW, with the company holding more equity than the rest of the region’s top 10 private power developers combined.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15823921/main.jpg
    Mark Dowdall