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Bahraini lenders maintained the highest net interest margins in the Gulf Co-operation Council in the second quarter of 2026, holding steady at 3.03 per cent and remaining the only national banking sector in the region to stay above the 3pc threshold.
Analysis by Kamco Invest shows that total outstanding credit facilities in the kingdom reached BD13.54 billion ($35.91bn) at the end of June, up 8.5pc year-on-year and 2.3pc quarter-on-quarter. Headline growth remained broadly stable into July.
Government borrowing served as the primary engine for expansion, surging 70.9pc year-on-year and 3.6pc sequentially to account for BD716.7 million – roughly two-thirds – of the BD1.07bn annual credit increase.
Private sector credit growth remained more subdued, reflecting an uneven recovery across commercially sensitive industries. Total business-sector credit grew 2.2pc year-on-year, supported by expansions in real estate activities, up 9pc, and other service activities, up 5.2pc. Mortgage lending rose 5.9pc over the same period.
By contrast, credit demand across wholesale and retail trade, construction, and financial and insurance services remained below year-earlier levels.
Meanwhile, listed banks across the GCC posted all-time high net profits of $17.7bn in the second quarter of 2026, driven by resilient non-oil corporate activity in Saudi Arabia and the UAE despite regional geopolitical disruptions and shipping friction in the Strait of Hormuz.
Aggregate net income rose 5.6pc quarter-on-quarter and 7.2pc year-on-year.
Despite the strong earnings performance, return on equity edged down to 15.5pc from 15.6pc in the previous quarter as total shareholder equity expanded 3.1pc to $447.9 billion.
Gross lending regained momentum following a brief post-conflict slowdown early in the year, rising 2.6pc sequentially to reach a record $2.59 trillion and bringing annual credit growth to 11.6pc.
Net loans rose 2.7pc to $2.51trn. Credit expansion was broad-based across all six Gulf states, led by Islamic banks, which grew financing by 3.3pc compared with 2.4pc at conventional peers.
Customer deposits grew at a slower 1.7pc sequential pace to a record $2.92trn, bringing annual growth to 6.8pc. The slower deposit accumulation pushed the region’s aggregate net loan-to-deposit ratio to a new high of 85.9pc, up from 85pc in the prior quarter.
Total revenues rose 2.4pc quarter-on-quarter to a record $36.2bn. Growth was supported by a 3.6pc jump in non-interest income to $11.3bn as energy and currency market volatility boosted treasury and transaction banking fees, offsetting rising funding costs as depositors shifted into term products.
Net interest income climbed 1.9pc to $24.9bn, with lenders relying on volume growth rather than rate shifts. Regional central banks held policy benchmark rates steady, tracking the US Federal Reserve’s target range of 3.50pc to 3.75pc.
Aggregate net interest margins compressed slightly to 2.78pc from 2.79pc in the previous quarter.
Loan impairment charges fell 6.5pc quarter-on-quarter to $2.5bn, marking a second consecutive decline as provisions normalised following spikes in late 2025 and early 2026. Asset quality remained stable, with non-performing loan ratios largely unchanged across major lenders.
Total GCC banking sector assets closed the quarter up 1.4pc at $4.07trn, with Islamic financial institutions accounting for 27.7pc of the total.
avinash@gdnmedia.bh
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