RIYADH: Banks in Kuwait, Qatar, and the UAE are expected to maintain stability in 2025, supported by strong capital buffers, favorable economic conditions, and supportive government policies, according to a new analysis. 

In Kuwait, S&P Global forecasts improved asset quality, driven by a stronger economy and lower interest rates. 

The banking sector is well-positioned to deal with potential geopolitical stress in the region, with stronger lending growth offsetting the negative impact of lower interest rates on profitability, it added.  

S&P Global’s analysis echoes the views shared by Fitch Ratings in November 2024, which stated that the standalone credit profiles of Islamic banks in Kuwait are expected to remain stable in 2025, supported by favorable operating conditions. 

“After an estimated 2.3 percent contraction in 2024, we expect Kuwait’s GDP growth will rebound to 3 percent in 2025 as OPEC+ oil production restrictions are gradually eased, and project implementation and reform momentum improves,” said Puneet Tuli, S&P Global Ratings credit analyst.   

The report added that accelerated reforms following last year’s political changes could improve the pace of reform and growth prospects for the economy, “which in turn would support higher lending growth for the banking system.”  

According to the report, the credit losses in the Kuwaiti banking sector are approaching cyclical lows. 

S&P Global added that banks are likely to resort to write-offs to limit the rise in the nonperforming loan ratio, supported by strong provisioning buffers. 

The analysis further noted that banks in Kuwait operate with robust capital buffers and typically retain 50 percent or more of their profits, which supports their capitalization. 

The US-based agency also highlighted that Kuwaiti banks’ funding structures benefit from a solid core customer deposit base and a net external asset position. 

“Deposits from government and public institutions have experienced some volatility in the past, as these entities seek to diversify their deposits among local and foreign banks. However, we believe that government support to systemically important banks will be forthcoming if needed,” said S&P Global.  

It added: “Private sector deposits from corporations and households have been stable and dominate Kuwaiti banks’ funding base.”   

Qatar’s outlook 

In Qatar, S&P Global expects continued strong performance for banks in 2025, driven by strong capitalization and ample liquidity. The rise in liquefied natural gas production, along with its impact on the non-hydrocarbon economy, is expected to support credit growth in the next two to three years. 

The report added that local funding sources will play an increasing role in supporting credit growth among Qatari banks, driven by slower public sector deleveraging. 

S&P Global also noted that the Qatari government’s strong support for its banking sector is expected to mitigate the risk of external debt outflows in the event of escalating geopolitical risks. 

“Geopolitical tensions in the Middle East are high but we currently do not expect a full-scale regional conflict, and we anticipate macroeconomic conditions in Qatar will remain broadly stable,” said S&P Global Ratings credit analyst Juili Pargaonkar.  

Forecast for the UAE

In the UAE, S&P Global forecasts improved asset quality metrics and lower credit losses in 2025, driven by a robust domestic economy.  

The agency expects banks in the emirates to maintain strong capital buffers, robust funding profiles, and continued government support in 2025, which will underpin their resilience. 

The analysis also noted that banks in the UAE have experienced a significant increase in deposits over the past three years, which will help sustain their strong growth momentum in 2025. 

“Deposit growth has improved in recent years as private corporations and retail depositors prioritized saving over spending, and higher interest rates provided better yields on deposits,” said S&P Global.   

It added: “We expect strong deposit growth to continue through 2025, given the non-oil economy remains supportive, leading to stronger cash flow generation from corporations.” 

RIYADH: Egypt’s annual inflation rate slowed to 23.4 percent in December 2024, down from 25 percent in November, according to figures from the Central Agency for Public Mobilization and Statistics.

The consumer price index for the country stood at 239.7 points in December, reflecting a deceleration largely driven by a drop in food prices.

Key food categories saw notable price decreases, with vegetables falling by 14 percent, dairy products, cheese, and eggs decreasing by 0.7 percent, fish and seafood dropping by 0.6 percent, and meat and poultry experiencing a slight reduction of 0.1 percent.

However, other sectors showed price increases, putting upward pressure on the overall inflation rate.

For example, telephone and fax services surged by 11 percent, fruit prices rose by 7.5 percent, and medical products, devices, and equipment saw a 5.5 percent increase.

Other notable price hikes included postal services (up 3.6 percent), hotel services (up 3.2 percent), and recreational and cultural services (up 2.8 percent).

Meanwhile, costs for telephone and fax equipment grew by 2.6 percent, while actual housing rentals increased by 1.6 percent. Hospital services saw a rise of 1.4 percent, with furniture, carpets, and floor coverings up by 1.3 percent.

Smaller price increases were recorded in oils and fats, electricity, gas, and fuel materials (up 0.7 percent), transportation services (up 0.5 percent), and basic foodstuffs like grains and bread (up 0.3 percent). Sugar and sugary foods, as well as private transportation costs, also saw slight increases of 0.2 to 0.3 percent.

Banking sector

Egypt’s banking sector continues to demonstrate stability and resilience, playing a vital role in maintaining the country’s economic, financial, and monetary stability, according to the Central Bank of Egypt’s latest Financial Soundness Indicators.

The sector’s capital adequacy ratio reached 19.1 percent by the end of Q3 2024, comfortably surpassing the regulatory minimum of 12.5 percent. This marks a 0.5 percent improvement from the previous period, highlighting the sector’s growing financial health.

In terms of asset quality, nonperforming loans represented just 2.4 percent of total loans, with provisions coverage for these loans standing at a strong 87.4 percent.

Liquidity levels remained robust, with local currency liquidity at 32.1 percent and foreign currency liquidity at 77.7 percent, well above the regulatory requirements of 20 percent and 25 percent, respectively.

The banking sector’s loan-to-deposit ratio was recorded at 61.3 percent by the end of Q3 2024, reflecting conservative lending practices. Meanwhile, profit margins remained impressive, with a return on equity of 32.2 percent for the 2023 fiscal year.