Standard & Poor’s Credit Ratings Agency (S&P Global) said the profitability of GCC Banks will remain strong in 2024, and their asset quality will stay robust despite higher-for-longer rates, due to supportive economies, contained leverage, and a high level of precautionary reserves.

In its related report, S&P stated that the US Federal Reserve Board (FRB) could begin cutting interest rates in December 2024, anticipating that most Gulf central banks will follow suit to maintain their currency pegs.

The FRB is likely to accelerate the pace of monetary easing in 2025, as economic growth slows below its potential, S&P said, predicting that the FRB will cut interest rates by 100 basis points throughout 2025, bringing them down to between 4 and 4.25 percent at year-end.

The central banks of most Gulf countries typically mirror the FRB’s interest rate movements to maintain their currency pegs, the agency added, noting that delaying interest rate cuts would boost their profitability.

Gulf banks have benefited from rising interest rates over the past two years and are expected to continue reaping these benefits in 2024, it further added.

By the end of 2023, the average return on assets for the largest 45 banks in the region reached 1.7 percent, up from 1.2 percent at year-end 2021, S&P said in conclusion.