Gulf Bank Customer Deposits Surge to a Record High of $2.92 Trillion
A report issued by KAMCO Invest stated that the Gulf banking sector recorded new record highs in revenues and net profits during the second quarter of 2026, despite ongoing regional geopolitical tensions and interest rates remaining at elevated levels for longer than expected. Lending activities regained some momentum following the weak performance recorded in the first quarter.
Net profit for the Gulf banking sector reached a new record of $17.7 billion in Q2 2026, representing a 5.6% quarter-on-quarter increase and a 7.2% year-on-year increase, despite the repercussions of the war and the quasi-blockade of the Strait of Hormuz, which led to a sharp decline in economic activity in the region.
Banks listed in the UAE and Saudi Arabia recorded year-on-year net profit growth of 8.2% and 8.4%, reaching $6.8 billion and $6.6 billion, respectively. Meanwhile, banks in Oman and Kuwait posted similarly strong net profit growth of 9.9% and 7.5%, respectively.
Total revenues for the banking sector continued to grow for the fifth consecutive quarter, reaching a record high of $36.2 billion, up 2.4% quarter-on-quarter, marking the highest growth rate in three quarters. Non-interest income led the growth drivers, rising 3.6% quarter-on-quarter to $11.3 billion, increasing its contribution to total revenues to 31.2%. Total net interest income also rose 1.9% quarter-on-quarter to a record $24.9 billion, while net interest income for Kuwaiti banks remained largely stable at $2.7 billion.
Loans rise to $2.59 trillion
The KAMCO report noted that lending activities among banks listed in Gulf markets regained some momentum in the second quarter, with total loans reaching a new record high of $2.59 trillion, up 2.6% quarter-on-quarter, compared to 2.2% in Q1 2026, while the year-on-year growth rate improved to 11.6%. All six Gulf countries recorded growth in total loans during the quarter.
Banks listed in the UAE led with 4.5% growth, followed by Omani banks at 4.1%. Kuwaiti banks returned to recording loan growth of 2.3% quarter-on-quarter, bringing total loans to $290.6 billion, after a 1.1% decline in the first quarter.
Total sector assets reached $4.07 trillion by the end of the second quarter, up 1.4% quarter-on-quarter, with Islamic banks accounting for 27.7% of the total.
Customer deposits reach $2.92 trillion
Total customer deposits among banks listed in Gulf markets reached a record $2.92 trillion by the end of Q2, up 1.7% quarter-on-quarter, compared to 3.4% growth in the first quarter, with year-on-year growth reaching 6.8%.
With lending growing at a faster pace than deposits, the net loan-to-deposit ratio for the sector rose to a new record high of 85.9%, up from 85.0% in the first quarter, remaining above the 80% level for the ninth consecutive quarter. In Kuwait, the ratio rose to 77.9% from 75.2% due to a decline in deposits.
Provisions for loan impairment among Gulf banks fell by 6.5% quarter-on-quarter to $2.5 billion, marking a second consecutive quarter of decline. Kuwaiti banks recorded the largest decrease, reducing provisions by 43% to $168.7 million, the lowest quarterly level in over a year.
Consequently, the return on equity for Kuwaiti banks improved by 10 basis points to 11.1%, supported by strong profit performance in the quarter. Profits rose to $1.7 billion from $1.3 billion, aided by the reduction in provisions.
Conversely, the total net interest margin for the Gulf banking sector declined to 2.78% by the end of Q2, down from 2.79% in the first quarter and 2.81% at the end of Q4 2025. The net interest margin for Kuwaiti banks stood at 2.73%.
