Banking analysts predict that GCC banks will maintain their strong performance in 2024, driven by increased lending, higher fee incomes, stable margins, and robust cost efficiency, barring unforeseen shocks. S&P Global Ratings analysts anticipate that rate cuts in 2025 could narrow regional bank margins but might also improve asset quality. Mohamed Damak from S&P Global Ratings highlighted that GCC banks are still vulnerable to slower economic growth due to oil market fluctuations, potential real estate sector corrections, and geopolitical tensions. In times of heightened uncertainty, these factors could lead to harmful capital outflows or sovereign liquidation of external assets for support, as previously observed.

GCC banks have outperformed global peers in terms of return on equity and market multiples, thanks to superior capital management, with an ROE advantage of 3-4 percentage points over the last two years, according to McKinsey. The non-oil sectors in Saudi Arabia and the UAE contributed to a 10.4% annualized lending growth among the top 45 GCC banks in the first half of 2024, up from 6.7% in 2023. Despite the shift from noninterest-bearing to remunerated deposits, interest rates kept margins steady at 2.7%, S&P Global reported.

Noninterest-bearing instruments declined to 45% by the end of 2023 from 48% in 2022, continuing to fall. This, along with steady non-oil sector growth, supported asset quality, with the cost of risk at 60-70 basis points. These factors helped banks maintain strong profitability, with the return on assets rising to 1.74% from 1.65% at the end of 2023, as per the S&P report. S&P analysts foresee GCC banks remaining resilient, with expected Federal Reserve rate cuts potentially reducing net income by 12% by the end of 2025, though this could also ease pressure on highly leveraged corporates and retail clients.

McKinsey noted that while high interest rates pose challenges for global banks, they have been beneficial for GCC institutions, enhancing shareholder value through high profits. However, McKinsey cautioned that the sector's strong performance could lead to complacency among bank managers, hindering the implementation of transformative strategies.