GCC banks deliver strong H1 2025 performance despite margin pressures

The banking sector across the Gulf Cooperation Council (GCC) region has delivered robust results in the first half of 2025, demonstrating resilience amid evolving headwinds. According to a new report by Ernst & Young (EY), the average return on equity (ROE) for banks in the region rose to 13.2 %, up from prior periods, driven by higher non-interest income and improved cost efficiencies. Consultancy ME+2Arab News+2 The cost-to-income ratio improved to 32.0 %, signalling strong operational discipline in the sector. Consultancy ME
This strong performance is notable given the backdrop of moderating net interest margins (NIMs) due to softer interest-rate growth and competitive pressures. Nonetheless, banks appear to be navigating the transition by focusing on digital transformation, cutting costs, and expanding fee-based activities. For example, banks in the GCC have invested heavily in mobile banking channels, branch network rationalisation and fintech partnerships. Global Finance Magazine
In terms of asset growth, another key indicator shows that in the first quarter of 2025, GCC banks posted a record US$15.6 billion in net profit (up ~7.1% quarter-on-quarter), underlining the strength of the sector. Arab News Banks are also benefitting from improved asset quality, lower loan impairment charges, and sustained credit growth in non-oil sectors.
The outlook remains cautiously optimistic. EY projects that with GDP growth in the region forecast at ~3.5% for 2025, driven by non-oil activities and infrastructure investment, banks are well-positioned to benefit. Agência de Notícias Brasil-Árabe At the same time, pressures persist: margin compression, global interest-rate uncertainty, and potential stress from asset-quality shifts must be monitored.
Implications for stakeholders: