S&P: Banking sector in Kuwait, Qatar and UAE is to stay stable

For instance, in Kuwait, S&P forecasts improved asset quality

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.

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.

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.

UAE’s outlook

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.