Banks in the UAE, Saudi Arabia, and Qatar are expanding their lending portfolios aggressively as interest rates continue to decline across the region, prompting a surge in loan demand and improved net income for the lenders.
Leading institutions such as Emirates NBD, First Abu Dhabi Bank (FAB), and Saudi Arabia’s Al Rajhi Bank have reported double-digit loan growth for the second quarter of 2025 and have raised their full-year guidance in response to improving market conditions.
According to data released by S&P Global Market Intelligence, five of the Gulf Cooperation Council's (GCC) top banks showed strong lending performance in Q2. Al Rajhi Bank led the trend, with loans up 19.3% nearly three times the 7.4% growth recorded in the same quarter a year ago.
Other Saudi banks followed, with Saudi National Bank growing its loan book by 12.2%, up from 10.3% a year earlier.
Lending growth accelerates
In the UAE, FAB raised its annual loan growth guidance to the low double digits after reporting a 10.7% increase in Q2, up from 6.3% last year. Emirates NBD revised its own projection after its lending grew 14.3% for the same period.
Meanwhile, Qatar National Bank (QNB) saw a 9.4% increase in its loan portfolio and updated its guidance to 7–9%, from the previously expected 5–7%. Notably, almost half of QNB’s loan growth came from operations in Turkey.
“Loan growth will likely stay strong in Qatar, Saudi Arabia, and the UAE for the rest of the year,” said S&P Global Ratings in a recent outlook issued on July 10. “These central banks are expected to follow the U.S. Federal Reserve’s anticipated rate cuts in the second half.”
Profits follow lending surge
Stronger loan volumes have translated into higher net interest income (NII) for most GCC lenders.
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QNB posted Q2 NII of $2.34 billion, up from $2.12 billion in the same period last year. While high interest rates continued to affect its Turkish margins, the bank said profitability should improve if Turkey proceeds with rate cuts.
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Emirates NBD reported a 6% rise in NII to $2.28 billion, despite a 22-basis-point decline in net interest margin (NIM) to 3.36%, primarily due to performance at its Turkish unit, DenizBank. The bank expects full-year NIM to range between 3.3% and 3.5%, assuming conditions stabilize in Turkey.
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Al Rajhi Bank saw the sharpest NII gain among major lenders, increasing 25% year-over-year to $1.95 billion, while its net profit jumped 31% to $1.64 billion, supported by both lending and fee-based income.
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FAB booked record earnings of $1.50 billion, a 29% increase, while Saudi National Bank and QNB reported 18% and 4% profit growth, respectively.
The sole exception was Emirates NBD, which saw a 10% decline in quarterly profit due to a $31 million impairment charge, a reversal from the $374 million gain booked in the prior-year period.
Turkish exposure under watch
With several Gulf banks maintaining operations in Turkey, credit rating agency Fitch warned in June that high inflation remains a risk. However, it added that declining inflation could help reduce monetary losses in the months ahead.
“We remain optimistic on Turkish operations improving if policy stabilization continues,” an Emirates NBD spokesperson said.
What this means for borrowers
As interest rates ease, many regional banks have begun offering discounts on existing loans, temporarily lowering interest rates for a one-year period to reflect the broader rate environment.
For consumers and businesses in the Gulf, especially the UAE, this trend could lead to easier access to credit and more favorable borrowing terms, particularly for personal loans, mortgages, and SME financing.
“With the U.S. Federal Reserve expected to cut rates and GCC central banks set to follow, we anticipate continued loan momentum in the second half of 2025,” said an analyst at S&P.
