The Gulf Cooperation Council (GCC) banking sector maintained a powerful performance in the first half of 2025, demonstrating strong profitability, asset quality, and robust capitalisation, according to the latest analysis from EY.
The sector’s resilience was highlighted even as regional central banks began to ease monetary policy, with rate cuts starting to impact net interest margins (NIMs) and liquidity.
The average Return on Equity (ROE) across the GCC banking industry stood at 13.2 per cent, driven by higher non-interest income and better efficiency. The cost-to-income ratio improved to 32pc, reflecting ongoing benefits from operational optimisation and digital transformation.
“The first half of 2025 demonstrates the resilience of the GCC banking sector. With solid capital buffers, healthier balance sheets and improved efficiency, banks are well-positioned to navigate near-term pressures and pursue long-term opportunities,” said EY Mena financial services leader Mayur Pau.
Asset quality strengthened significantly, with non-performing loans (NPLs) declining to 2.4pc from 2.8pc a year earlier. Capitalisation remains a core strength, with an average tier 1 ratio of 17.5pc, ensuring the sector’s capacity to absorb external shocks.
This performance comes against a supportive economic backdrop, with the GCC economy forecast to grow by 3pc in 2025, accelerating to 4.1pc in 2026. Non-oil sectors, driven by diversification initiatives and foreign investment, continue to be the main engine for growth.
Despite the solid fundamentals, banks are adjusting to a tightening environment.
Net Interest Margins (NIMs) eased to 2.6pc, down from 2.8pc in H1 2024, reflecting the impact of rate cuts initiated in late 2024. Further compression is expected following September 2025 reductions.
Liquidity conditions tightened, with the loan-to-deposit ratio rising to 94.1pc.
Mr Pau added that while margins are under pressure, profitability remains intact, underpinned by rising non-interest income and stable asset quality. Credit growth is solid, especially in Saudi Arabia and the UAE, where national transformation agendas continue to drive lending activity.
The report also noted that banks are actively diversifying revenue streams and accelerating digital transformation through AI-driven banking and enhanced digital solutions. Regulatory compliance, including alignment with Basel III and AML/CFT frameworks, remains a key priority, positioning the sector for long-term competitiveness.
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