meed-logo

line1 line2 line3
SIGN IN / REGISTER

Kuwaiti banks hunt for growth

15 August 2024

The broader economic backdrop for Kuwaiti lenders is relatively more challenging than for peers in other Gulf states, with the state budget back in deficit territory and oil revenues down 20% in 2023-24.

The Washington-based IMF estimates real economic activity to have fallen by 2.2% in 2023, with the oil sector contracting by 4.3% due to Opec+ production quota cuts.

Even so, Kuwaiti lenders have managed to put in some decent performances, benefitting – like their Gulf peers – from stronger net interest margins (NIMs) that have flowed from the global high interest rates of recent years.

Overall banking sector profits grew at an impressive 28.7% in 2023, according to Kamco Invest Research.

This year, profit performances are unlikely to match such increases. Traditionally the country’s largest bank, National Bank of Kuwait (NBK), for example saw a 6.2% increase in first-half 2024 profits to KD292.4m ($953.6m).

Kuwait Finance House, newly enlarged since its acquisition in February this year of Ahli United Bank (AUB), creating one of the largest Islamic banks globally, reported a 2.3% increase in net income to KD341.2m ($1.12bn) for the same period.

Policy pressure

Higher interest rates have exerted a negative impact on lending in Kuwait; according to the IMF, growth in credit to the non-financial private sector fell in 2023 to only 1.8% as bank lending rates rose in response to gradual policy rate hikes by the Central Bank of Kuwait (CBK), broadly in line with global monetary policy tightening.

However, it added that in light of prudent financial regulation and supervision, banks have maintained strong capital and liquidity buffers, while their profitability has rebounded from pandemic lows, and non-performing loans remain low and well provisioned for.

One challenge facing Kuwaiti lenders is that the domestic market still does not provide sufficient lending opportunities to materially impact their performances. In part, this reflects familiar issues related to Kuwait’s unique political structure.

“Political conflicts involving the parliament and the government delayed the much-needed fiscal and economic reforms, which have put pressure on growth and limit the credit growth potential of the banking sector,” says Gilbert Hobeika, a director at Fitch Ratings.

This has implications for Kuwait’s lenders because if they cannot grow domestically, they will likely look beyond the country’s borders.

Looking beyond Kuwait is designed to create market share and build stronger franchises.

KFH is a case in point. Upon completion of its merger with AUB Kuwait, it is now placed as a rival of NBK in terms of size, giving it the critical mass to enable it to consider expanding into other GCC markets. Market speculation has centred on the potential acquisition of a large stake in Saudi Investment Bank. 

There is also the prospect of another large domestic merger, with Boubyan Bank and Gulf Bank, two Kuwait-listed sharia-compliant lenders, undertaking an initial feasibility study for a potential tie-up. Further consolidation moves could see a conventional lender absorbing an Islamic player or gaining an Islamic subsidiary. All options remain open.

Relative weakness

That focus on inorganic expansion also reflects the weaker profitability seen in Kuwait’s banking sector relative to other GCC banking markets.

There are several reasons for this, says Hobeika. “One is that Kuwait has one of the highest loan loss allowance coverages of stage three loans, meaning that while you could see in the region of 70-120% in the GCC, in Kuwait banks could reach 500% and on average around 250%. This is because the CBK is much more conservative than any other regulator in the region.”

The other point is the pressure on Kuwaiti banks’ NIMs. Different considerations explain why Kuwaiti banks have not benefitted from higher NIMs in the same way as Saudi or UAE banks have.

“The dynamics are really different,” says Hobeika. “One is the pricing cap set by the Central Bank, and then you’ve got the fixed interest rates on retail loans, so they cannot increase their pricing. Then you’ve got a huge amount of murabaha on the Islamic side, which are fixed for long durations.”

In an overbanked economy such as Kuwait, the result is increased competition, with banks bidding to take a piece of a small cake.

That said, the effective supervision of the CBK provides for some additional support for banks.

“They will provide some relief for them to be able to generate efficient operating profit, to support their capital and internal generation of capital. Even if the performance is lower, it’s still sufficient to support internal capital generation,” says Hobeika.

The NIM situation reflects Kuwait’s distinctive policy approach. CBK does not systemically follow the US Federal Reserve’s interest changes, meaning that typically, every two or three changes made by the Fed will be followed by a single change in Kuwait. 

According to an analysis by Kuwait-based research firm Marmore, the approach of skipping interest rate tweaks has meant that while the overall NIM has changed in line with the global policy rate, the magnitude of change has been smaller. For that reason, NIMs might not decline for all Kuwaiti banks in the anticipated forthcoming easing cycle.

Marmore notes that this year, while banks such as NBK expect their NIMs to be stable, other banks have highlighted the difficulty in providing guidance for NIMs given the uncertainty over the timing and magnitude of rate cuts.

And while some Kuwaiti lenders have not gained as much benefit as other Gulf banks from higher interest rates, they may yet feel the positive impact from lower rates, given that retail loans are fixed.

These advantages may seem marginal, but in a global climate where lower interest rates will reduce the capacity to generate easy profits as in past years, they may prove to be welcome for Kuwait’s lenders.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12309760/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Saudi Arabia seeks firms for food testing labs PPP project

    2 April 2026

    Saudi Arabia’s Ministry of Municipalities & Housing, in collaboration with the National Centre for Privatisation & PPP (NCP), has issued an expression of interest (EOI) notice for a contract to develop and operate municipal food safety laboratories under a public-private partnership (PPP) framework.

    The project will be delivered on an equip, operate, maintain and transfer basis, with a contract duration of five years.

    The EOI was issued on 1 April, with a submission deadline of 15 April.

    The project scope covers the equipping, operation and maintenance of municipal food safety laboratories across five municipalities: Hafr Al-Batin, Northern Borders, Tabuk, Qassim and Al-Ahsa.

    Key objectives include upgrading laboratory equipment, expanding chemical and microbiological testing capacity for food and water products, and enhancing testing accuracy to support laboratory compliance across the value chain. The project also aims to ensure effective knowledge transfer and a structured handover to the relevant municipalities at the end of the contract term.

    NCP said in a statement: “The project is intended to strengthen public health and safety standards for citizens and residents of the kingdom in alignment with Saudi Vision 2030, while developing the municipal monitoring ecosystem, optimising food and water testing services, and enabling private sector participation in accordance with global best practices.”

    In October last year, NCP highlighted the scale and diversity of opportunities in the kingdom’s PPP pipeline.

    “At the moment, we have around 200 projects in the pipeline with a total value of roughly $190bn,” said Salman Badr, executive vice president – infrastructure advisory, NCP, during a MEED webinar.

    The projects are spread across 17 sectors. “We have a very sizable programme, and it reflects the breadth of the kingdom’s transformation agenda,” he said.

    NCP was established in 2017. It serves as the central authority and catalyst for designing and implementing privatisation and PPP projects across the kingdom.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16236864/main.gif
    Yasir Iqbal
  • Parsons to project manage Al-Ittihad Sports Village in Jeddah

    2 April 2026

    US-based engineering firm Parsons Corporation has been awarded a contract by Saudi Arabia’s Al-Ittihad Club Company to act as project management consultant for the Al-Ittihad Sports Village in Jeddah.

    Under the contract, Parsons will support the project during the design stage.

    The sports village will be developed near King Abdullah Sports City and will include Al-Ittihad’s headquarters, academy training pitches and supporting facilities, performance development centres, administrative offices and a range of commercial components.

    The development is being designed in line with Fifa requirements and international best practices, with the aim of strengthening high-performance sports infrastructure in Saudi Arabia.

    The latest award follows Parsons’ recent appointment to a 60-month contract by the Public Investment Fund-backed New Murabba Development Company to provide design and construction technical support.

    As part of that role, Parsons will support the development of the project’s downtown area, which will span 14 million square metres of residential, workplace and entertainment space.

    In October last year, Parsons announced it had secured a SR210m ($56m) contract from Diriyah Company. Its scope includes the design and construction supervision of infrastructure works in phase two of the Diriyah project, covering streets, footpaths, open spaces, and civic buildings and facilities.

    In May last year, Parsons also confirmed its appointment as delivery partner for the airside and landside packages at King Salman International airport in Riyadh.

    In a statement, Parsons said it had signed two contracts with King Salman International Airport Development Company. The first covers airfield assets, including runways, taxiways, aircraft parking areas and air traffic control towers.

    The second contract relates to landside infrastructure, including roads, utilities, tunnels, bridges, rail networks and landscaping.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16233673/main.jpg
    Yasir Iqbal
  • Read the April 2026 MEED Business Review

    2 April 2026

    Download / Subscribe / 14-day trial access

    When the first missiles and drones were fired at the GCC on 28 February, the region’s economic story pivoted abruptly, from long-term vision-building to near-term resilience.

    The conflict is now the Gulf’s most consequential economic stress test in a generation. It is challenging the safe haven premium that underpins capital inflows, while disrupting the physical networks that keep the region’s economies running, from energy exports and shipping lanes to airports and tourism.

    MEED editor Colin Foreman asks whether the GCC can sustain investor confidence as energy assets, trade routes, airports and banks absorb the shock. Read more here.

    April’s market focus is on Saudi Arabia, where the Iran war is compounding the logic behind the kingdom’s strategic pivot in its investment plans.

    This edition also includes MEED’s 2026 GCC contractor ranking, in which Chinese firms have surged to the top as Saudi spending cuts and geopolitical risks weigh on GCC construction activity.

    In the latest issue, we explore the region’s evolving arbitration landscape; present exclusive leadership insight from Jacobs on the future of passenger rail in the Middle East; and talk to Leyla Abdimomunova, head of real estate and construction at the Public Investment Fund’s National Development Division, about remaking Saudi construction.

    We hope our valued subscribers enjoy the April 2026 issue of MEED Business Review. 

     

    Must-read sections in the April 2026 issue of MEED Business Review include:

    > AGENDA: Gulf economies under fire

    INDUSTRY REPORT:
    GCC contractor ranking
    > Construction guard undergoes a shift

    > LEGAL: Redefining the region’s arbitration landscape

    > QATAR LNG: Qatar’s new $8bn investment heats up global LNG race  

    > INTERVIEW: Leyla Abdimomunova, National Development Division, PIF

    > LEADERSHIP: Shaping the future of passenger rail in the Middle East 

    > SAUDI MARKET FOCUS: 
    > COMMENT: Risk accelerates Saudi spending shift
    > GVT &: ECONOMY: Riyadh navigates a changed landscape
    > BANKING: Testing times for Saudi banks
    > UPSTREAM: Offshore oil and gas projects to dominate Aramco capex in 2026
    > DOWNSTREAM: Saudi downstream projects market enters lean period
    > POWER: Wind power gathers pace in Saudi Arabia
    > WATER: Sharakat plan signals next phase of Saudi water expansion
    > CONSTRUCTION: Saudi construction enters a period of strategic readjustment
    > TRANSPORT: Rail expansion powers Saudi Arabia’s infrastructure push

    > MEED COMMENTS: 
    >     Iran war erodes LNG’s image of reliability
    > Dubai's real estate faces a hard test
    > Energy resilience matters as much as capacity
    > Drawn-out conflict may shift planning priorities

    > GULF PROJECTS INDEX: Gulf index rises amid tensions

    > FEBRUARY 2025 CONTRACTS: Middle East contract awards

    > ECONOMIC DATA: Data drives regional projects

    > OPINION: The end of the republic and the end of times

    > BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16222272/main.gif
    MEED Editorial
  • Consultants submit bids for Al-Maktoum airport metro link

    2 April 2026

     

    French firm Egis has emerged as the lowest bidder for the design contract for the Route 2020 extension, which will start from the Expo 2020 metro station and connect with Al-Maktoum International airport’s West Terminal.

    Egis submitted the lowest bid, priced at AED232.6m ($63.3m).

    The other bidders are:

    • Halcrow International (UK): $66.4m
    • Parsons (US): $71.3m
    • Aecom (US): $82.6m
    • Surbana Jurong (Singapore): $106m

    The extension to the line will run for about 3 kilometres (km) and will feature two stations.

    MEED understands that the invitation to bid was issued in January with a submission deadline of mid-March.

    The existing Route 2020 metro link is a 15km-long line that branches off the Red Line at Jebel Ali metro station. The line comprises 11.8km of elevated tracks and 3.2km of tunnels, and has five elevated stations and two underground stations.

    The Roads & Transport Authority (RTA) awarded the AED10.6bn ($2.9bn) design-and-build contract for the project to a consortium of Spain’s Acciona, Turkiye’s Gulermak and France’s Alstom in 2016.

    Dubai’s plans for its metro network do not stop with connecting the extension of the Route 2020 metro line to Al-Maktoum International airport. There are long-term plans for further extensions.

    Other metro projects

    In October last year, MEED exclusively reported that the RTA had selected US-based engineering firm Aecom to provide consultancy services for the upcoming Dubai Metro Gold Line project, also known as Metro Line 4.

    The Gold Line will start at Al-Ghubaiba in Bur Dubai. It will run parallel to – and alleviate pressure on – the existing Red Line, before heading inland to Business Bay, Meydan, Global Village and residential developments in Dubailand.

    The other metro lines in the pipeline are the Purple Line and the Pink Line, both of which are in the early stages of development.

    Firms are also bidding to update the emirate’s rail masterplan. In October 2025, MEED reported that 10 firms had submitted offers to undertake the project.

    The rail masterplan study will update and modify the RTA’s rail network, which includes the Dubai Metro and Dubai Tram. These plans will support Dubai’s 2040 urban masterplan, which aims for all residents to be within a 30-minute metro or light-rail trip to their place of work. 

    The existing network includes the Red and Green lines of the Dubai Metro and the Dubai Tram, which connects Al-Sufouh and Dubai Marina to the metro network. The last rail project to start operations in Dubai was the Red Line extension that opened for Expo 2020.

    There are also existing and planned rail lines connecting Dubai to other emirates that are being developed and operated by Abu Dhabi-based Etihad Rail. These include passenger and freight services as well as a high-speed rail connection.

    In December 2024, the RTA awarded a AED20.5bn main contract for the Dubai Metro Blue Line project to a consortium of Turkish firms Limak Holding and Mapa Group and the Hong Kong office of China Railway Rolling Stock Corporation.

    The Blue Line consists of 14 stations, including three interchange stations at Al-Jaddaf, Al-Rashidiya and International City 1, as well as a station in Dubai Creek Harbour. By 2040, daily ridership on the Blue Line is projected to reach 320,000 passengers. It will be the first Dubai Metro line to cross Dubai Creek, doing so on a 1,300-metre viaduct.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16233295/main.jpg
    Yasir Iqbal
  • Chevron to drill two gas wells in Egypt before 2027

    2 April 2026

    Chevron is planning to drill two new gas wells this year, one in the Narges field and another in the Western Mediterranean, according to Clay Neff, the president of exploration operations at the company.

    The well in the Western Mediterranean area is due to be drilled in partnership with the London-headquartered oil and gas company Shell.

    Egypt and the broader East Mediterranean region will be core pillars of Chevron’s investment roadmap over the coming years, Neff said.

    He also said that the investments in Egypt reflected the Eastern Mediterranean’s growing strategic importance within Chevron’s global portfolio

    According to Neff, Chevron is aiming to increase its operational production capacity in the region by as much as 50% over the next five years, something that is expected to strengthen cash generation and enhance profitability from its regional operations.

    Chevron’s presence in Egypt dates back nearly nine decades, beginning in 1937 with the distribution of petroleum products before expanding into exploration and production activities in recent years.

    The company currently produces more than 2 billion cubic feet of gas a day across the Eastern Mediterranean.

    Chevron is advancing broader expansion initiatives in the Eastern Mediterranean region that include modernising existing facilities and increasing production capacity, alongside ongoing engineering and design work on the Aphrodite gas field in Cyprus.

    A recently signed government agreement enables the construction of a subsea pipeline connecting Cyprus directly to Egypt.

    Neff said the company is targeting an early final investment decision on the project next year, expressing confidence that close cooperation between Cairo and Nicosia will support timely progress.

    He emphasised that meeting domestic and regional energy demand remains the company’s top priority before directing additional supplies toward export markets in Europe or elsewhere.

    Neff said that Egypt’s well-developed energy infrastructure, particularly its pipeline network and liquefaction plants, provided a strategic edge, adding that new discoveries and capacity expansions will gradually support higher export volumes while safeguarding local supply needs.

    The comments from Neff come shortly after it was announced that the UK oil and gas company BP was making progress with its campaign to drill five wells in Egypt’s portion of the Mediterranean.

    BP’s Fayoum 4 well is scheduled to start production in July, with an estimated output of around 100 million cubic feet of gas a day.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16226687/main.jpg
    Wil Crisp