Gulf banks are holding up well despite rising geopolitical tensions in the Middle East, underpinned by solid financial positions and early regulatory action, though the full impact on the sector has yet to emerge.
Mohamed Damak, managing director at S&P Global Ratings, told Asharq Al-Awsat there have been no significant capital outflows from the region’s banks so far. Any deterioration in asset quality, he said, would take time to show up in financial results.
A recent S&P Global Ratings report reached similar conclusions, noting that operations remain stable and asset quality indicators have yet to weaken, although pressures could build in the months ahead.
The agency’s baseline scenario assumes disruptions will persist in parts of the region, even if the most acute phase subsides within weeks.
Supply chain bottlenecks, port congestion and delays in insurance services could linger, while security risks along shipping routes may weigh on trade and keep inflation elevated.
That, in turn, could affect sectors such as transport, tourism, real estate and retail — with knock-on effects for banks’ asset quality and growth.
Still, Damak said regulatory easing measures introduced by some authorities, combined with banks’ strong fundamentals, should help cushion part of the impact.
He pointed to robust balance sheets across the region: average Tier 1 capital stands at about 17.1 percent, non-performing loans at roughly 2.5 percent, and provisioning coverage near 158.7 percent among the 45 largest banks.
Liquidity levels also remain comfortable, giving banks room to absorb shocks, even if funding conditions tighten or certain sectors come under strain.
Authorities across the Gulf have moved quickly to shore up financial stability, broadly echoing measures seen in Europe, the United States and parts of East Asia.
Qatar’s central bank has introduced unlimited repo facilities in riyals, alongside overnight and three-month funding options, to support liquidity management and borrowers.
In Kuwait, the central bank eased liquidity and capital requirements, including the liquidity coverage ratio and net stable funding ratio, while raising lending ceilings and funding gap limits to support credit growth.
In the United Arab Emirates, banks have drawn on emergency liquidity facilities, borrowing against a range of collateral as part of broader efforts to sustain lending and liquidity in the system.
At the same time, banks have activated contingency plans, shifting to remote operations, scaling back branch networks and relying on backup data centers to reduce operational risks.
Uncertainty continues to dominate the outlook. But with strong capital, ample liquidity and regulatory support, Gulf banks appear well placed to withstand the current turbulence — even if a prolonged disruption could test the sector more severely.
