Meed | Kuwaiti banks hunt for growth

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.

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James Gavin

Exclusive from Meed

Tender issued for Libyan gas project
17 September 2026
Nakheel awards $218m Dubai Islands buildings deal
17 September 2026
Aldar and Mubadala acquire Masdar City Square
17 September 2026
Dubai announces new 80km highway corridor
16 September 2026
Contractors submit Expo 2030 convention centre interest
16 September 2026

Tender issued for Libyan gas project
17 September 2026
An invitation to bid has been issued for a contract to conduct environmental assessments for the project to expand the Mellitah oil and gas complex in Libya.

The bid submission deadline is 2pm today (17 September) Libyan time.

The scope of the project includes provision of:
- An environmental baseline study (EBS)
- An environmental impact assessment (EIA)
- An environmental management plan (EMP)
The client is Mellitah Oil & Gas (MOG), which is a joint venture of Italy’s Eni and Libya’s National Oil Corporation (NOC).

MOG is based in Tripoli and operates both onshore and offshore oil and gas facilities.

The joint venture owns and operates six major oil and gas fields across the North African country.

According to the tender documents, the company that is awarded the contract will need to prepare environmental management measures in compliance with:
- Libyan environmental legislation
- Ministry of Environment requirements
- NOC environmental guidelines
- Applicable international environmental standards and best practices
The expansion of the Mellitah oil and gas complex is part of a project estimated to be worth $8bn.

The wider project is known as the Mellitah Complex Expansion & CO2 Management Integrated Development Project.

It has six main packages:
- Onshore package
- Offshore Structure A
- Offshore Structure E
- Subsea pipeline package
- Site preparation work
- Carbon capture and storage facility
Security issues and political instability have been a major problem for Libya’s oil and gas sector since the country’s civil war started in 2011.

Earlier this month, the Mellitah oil and gas complex was forced to shut down temporarily due to a protest over deteriorating public services.

The existing onshore complex includes housing, processing units, storage facilities and export facilities.

It also serves as the launch point for the Greenstream pipeline, which delivers Libyan gas directly to Italy.

The planned expansion of the complex will involve:
- Construction of a new fourth gas processing train
- Construction of a third condensate train
- Construction of a third natural gas liquids fractionation train
- Construction of a fourth sulphur recovery unit train
- Installation of a hydrogen sulphide enrichment unit
- Installation of a sulphur recovery unit
- Construction of other associated facilities
The Mellitah complex is located about 100 kilometres west of Tripoli and is a key energy facility in the west of the country.
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Wil Crisp

Nakheel awards $218m Dubai Islands buildings deal

17 September 2026

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Dubai-based developer Nakheel, now part of Dubai Holding, has awarded a main construction contract worth more than AED800m ($218m) for phases one and three of Bay Grove Residences at Dubai Islands.

The contract was awarded to the local firm Metac General Contracting Company.

It covers the construction of 537 apartments, comprising one- to four-bedroom units, across seven residential buildings.

Phase one includes 296 units in four buildings, while phase three comprises 241 units across three buildings.

The works are scheduled for completion in late 2028.

Bay Grove Residences will ultimately comprise 1,154 homes across 15 buildings. Planning is under way for the remaining 617 homes in phases two and four, with further contract awards expected.

In August last year, Nakheel awarded a AED2.6bn ($708m) contract to Abu Dhabi-based Fibrex Contracting to build the Bay Villas project at Dubai Islands. The contract includes constructing 636 villas.

In April this year, another AED527m ($143m) contract was awarded to local firm Al-Nasr Contracting Company to construct the primary infrastructure and utilities works on Island B at the development.

The Dubai Islands development consists of five islands spanning 18.6 square kilometres. It features more than 59 kilometres (km) of waterfront and 20km of beaches, as well as parks, golf courses, promenades and cycling paths.

The offshore island project gained renewed momentum in 2022, when Nakheel unveiled a new masterplan and rebranded it as Dubai Islands.

The reclaimed islands were originally part of the Palm Deira project, which was partially completed before being put on hold in 2008.

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

Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

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

> AGENDA: Gulf nuclear revival takes shape

> MARKET FOCUS: Kuwait keeps dealmaking alive under fire

> INDUSTRY REPORT: Gas processing takes centre stage in Mena region

> INTERVIEW: Emsteel persists with business productivity and efficiency

> TUNNELS: The Gulf’s next construction boom is happening underground

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

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Yasir Iqbal

Aldar and Mubadala acquire Masdar City Square
17 September 2026

Abu Dhabi-based sovereign wealth fund Mubadala Investment Company and local developer Aldar have completed the acquisition of Masdar City Square at Masdar City, in a transaction valued at AED918m ($250m).

The deal was executed through their joint venture established in 2024.

Masdar City Square comprises more than 47,000 square metres (sq m) of net leasable area across seven office buildings.

Completed in Q1 2026, the development is 99% occupied. Tenants include Taqa, the Department of Energy, Emirates College and the Mohamed Bin Zayed University of Artificial Intelligence.

The transaction expands the joint venture’s real estate portfolio in Masdar City, which is now valued at AED4.7bn ($1.3bn).

Masdar City is one of the region’s leading hubs for clean energy, artificial intelligence, advanced research and sustainable urban development.

The joint venture acquired The Link project at Masdar City for AED654m ($178m) in April.

Comprising about 32,000 sq m of net leasable area across five buildings, The Link is fully leased to a portfolio of major tenants, including Abu Dhabi Future Energy Company (Masdar) and the Mohamed Bin Zayed University of Artificial Intelligence.

The asset includes Grade A, Leed Platinum office space, a net-zero-energy headquarters building, a multi-use hall and residential accommodation, supporting its position as a high-performing, integrated component of Masdar City.

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Yasir Iqbal
Dubai announces new 80km highway corridor
16 September 2026

Dubai has approved the construction of the new fourth corridor, a major highway programme aimed at boosting inter-emirate connectivity, increasing road capacity and easing congestion.

The corridor will extend 80 kilometres, from Al-Faya Road in Abu Dhabi to Al-Shanouf Road in Sharjah.

It will include 12 lanes, 72 bridges and 17 tunnels.

The project is expected to reduce travel times by up to 60% and serve more than 3.1 million people, while providing links to Al-Maktoum International airport and Etihad Rail.

It will have the capacity to accommodate 24,000 vehicles per hour in each direction.

The project will be delivered in two phases. The first phase, running from Al-Shanouf Road to Dubai-Al Ain Road, will be delivered at a cost of AED3.5bn ($953m).

The second phase will stretch from Dubai-Al Ain Road to Al-Faya Road in Abu Dhabi.

Hamdan bin Mohammed: In line with the directives of His Highness Sheikh Mohammed bin Rashid Al Maktoum to boost investment in infrastructure, I approved the New Fourth Corridor to strengthen Dubai’s road network and enhance connectivity with the UAE’s federal road network.… pic.twitter.com/zlIyY2yKBN

— Dubai Media Office (@DXBMediaOffice) September 16, 2026

The scheme adds a fourth spine to a network that has long relied on three main corridors: the E11 (Sheikh Zayed Road/Al-Ittihad Road); the E311 (Sheikh Mohamed Bin Zayed Road) and the E611 (Emirates Road), which together carry more than 850,000 vehicles commuting between Dubai and the northern emirates daily.

That concentration has made the route one of the country’s most congested, with peak-hour bottlenecks a persistent problem for residents. The new corridor is designed to divert a significant share of that traffic onto a higher-capacity route, rather than add pressure to the existing network.

The project also aligns with the Dubai 2040 Urban Master Plan, which anticipates population growth to 5.8 million by 2040 and calls for the expansion of roads, railways, airports and ports to support that growth and reinforce Dubai’s position as a global trading hub. This is reflected in the corridor’s direct links to Al-Maktoum International airport and Etihad Rail.

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Yasir Iqbal

Contractors submit Expo 2030 convention centre interest

16 September 2026

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Expo 2030 Riyadh Company (ERC), responsible for delivering the Expo 2030 Riyadh venue, received contractor interest on 14 September for a contract to design and build a convention centre in the site's Collaboration District.

Construction is slated to begin in January 2027 and take 29 months. The development will cover a total gross external area of more than 28,000 square metres (sq m). The total programme area will be about 22,000 sq m and the gross floor area will be 17,000 sq m. The maximum height of the building will be 41.5 metres.

The venue will be laid out across two levels, with a mezzanine, roof terraces and a 4,030 sq m basement, in addition to mechanical, electrical and plumbing and back-of-house spaces.

Two flexible exhibition halls are planned, covering a combined 7,280 sq m, as well as 3,800 sq m of pre-function space, 650 sq m dedicated to meeting rooms and 2,200 sq m of outdoor exhibition space in the north and south plazas.

The appointed main contractor will assume responsibility for packages including the early works substructure and the lead design consultant's deliverables, while carrying out the full scope of superstructure, above-ground waterproofing, external facades, masonry, base build and specialised fit-outs for VVIP, VIP and visitor areas.

Further scope includes delivering comprehensive MEP services; vertical transportation; final infrastructure tie-points; public-realm hard and soft landscaping; testing, commissioning, handover documentation; and management of the defects liability period.

The expression of interest notice was floated on 13 September.

The unusually brief expression of interest deadline of just one day underscores a compressed procurement timeline.

This accelerated tender and evaluation schedule signals that project organisers are operating under time pressure to secure contractors and maintain the tight schedule required ahead of the event's opening.

ERC expects to award the formal contract by the end of this year and begin construction in January next year.

The project is due for completion in early 2030, in time for the main event in October of that year.

Site progress

Construction activity at the Expo site is accelerating, with Riyadh moving to award its first major vertical contracts and advancing infrastructure works across the programme.

Earlier this month, MEED exclusively reported that ERC has tendered a contract to deliver the Souq areas within the expo site.

These areas are divided into five precincts, with a total development area of about 300,000 sq m.

In September, Saudi Arabia’s Royal Commission for Riyadh City awarded a design-and-build contract for the construction of a new metro station catering to the Expo 2030 site.

In April, ERC awarded two contracts for the next phase of infrastructure works at the site to local firm Alyamama Company.

The scope covered the construction of road networks and infrastructure for water, sewage, electricity, telecommunications and electric vehicle (EV) charging.

These awards followed ERC’s January award of an estimated SR1bn ($267m) contract for initial infrastructure works at the site to local firm Nesma & Partners.

That scope covered about 50 kilometres of integrated infrastructure networks, including internal roads and essential utilities such as water, sewage, electrical and communications systems and EV charging stations.

The masterplan covers 6 square kilometres, making it one of the largest sites ever designated for a World Expo event. Situated north of the Saudi capital, the site will be located near the future King Salman International airport and will provide direct access to landmarks within Riyadh.

The Public Investment Fund, Saudi Arabia’s sovereign wealth vehicle, launched ERC – a wholly owned subsidiary – in June 2025 to build and operate facilities for Expo 2030.