Consolidation will continue to shape the market in Europe, the Middle East and Africa (EMEA) next year, particularly when it comes to smaller Islamic banks with weaker franchises, said Redmond Ramsdale, head of Middle East Bank Ratings and Islamic Banking, Fitch Ratings.

Islamic banks are expected to maintain solid liquidity, adequate capital buffers, and stable asset quality, he said, indicating the “neutral’ outlook for EMEA Islamic banks in 2025.

Sound profitability should continue despite lower rates, which will remain restrictive in many markets, Ramsdale stated.

In the GCC, Jordan, Iraq and Turkey, Islamic banks’ market share of sector assets was 9%–85%, with growth likely to outpace conventional banks in 2025.

Ramsdale said that Sharia-sensitivity, awareness and confidence are higher in these markets, with supportive regulation and the segment being long-established.

In some EMEA markets with lower market shares, governments have strategies to promote the sector, while in others it could grow organically as banking penetration in general rises, he said.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)