Outstanding credit facilities for GCC banks witnessed a healthy q-o-q growth of 2.1% during Q4-2023 with aggregate gross loans reaching $2 trillion, according to Kamco Invest, a regional non-banking financial powerhouse based in Kuwait.

The y-o-y growth was even stronger at 7.0% during the quarter. All country aggregates in the GCC showed growth in lending during the quarter that came after mixed trends during the previous quarter.

The growth once again reflected a robust projects market pipeline in the region with recent reports showing governments now looking at funding support in the form of debt issuances to support the ongoing activity.

Customer deposits increase

On the liquidity front, customer deposits increased at an equivalent pace of 2.1% q-o-q to reach $2.39 trillion at the end of Q4-2023, once again led by growth in deposits in all markets in the GCC.

The net impact of an almost equivalent growth in lending and deposits was a marginal improvement in the aggregate loan-to-deposit ratio for the aggregate GCC banking sector that reached 79.2% at the end of Q4-2023.

Meanwhile, total net income was up for the fourth consecutive quarter to reach $14.2 billion in Q4-2023 registering a q-o-q increase of 2.4% supported by both higher net interest income and non-interest income during the quarter.

Net interest income

Higher interest rates supported net interest income during the quarter while elevated financial markets with double digit growth in the MSCI World index and high single digit growth in emerging market equity indices supported non-interest income.

In addition, almost all key asset classes globally witnessed growth during the quarter, including double-digit growth in gold and bond benchmarks.

Elevated interest rates globally and in the GCC as well as a steep downgrade to the number of cuts expected this year is expected to be largely positive for GCC banks, Kamco said.

Resilient lending

This comes as sector benefits from resilient lending in almost all markets as well as higher oil prices offset tight liquidity conditions in specific high-growth markets like Saudi Arabia.

Moreover, any rate cut expected this year would also be beneficial for the banks as it eases pressure on cost of funding front and further supports lending activity. Meanwhile, the latest comments from the US Fed and forecasts on rate cuts point to much bleak picture in terms of rate cuts, especially in the US and indicates a divergent monetary policy vs. EU and other major economies.

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