Kuwaiti banks demonstrate the strength of their performance and financial positions
Waleed Mansour: A recent report published by “Mideat” indicated that the strong financial position of Kuwaiti banks, along with the rapid easing of regulatory measures, contributed to maintaining lending momentum despite the war’s repercussions. At the same time, credit rating agencies continued to express confidence in the banking sector, bolstered by expectations of sustained sovereign support.
The report noted that while 2025 saw the launch of reforms embodied in the Financing and Liquidity Law and the Mortgage Law, 2026 was characterized by the resilience of the banking sector in the face of sharp shifts in the business environment.
**Banking Readiness**
The report confirmed that Kuwaiti banks, like their counterparts in Gulf countries, demonstrated a high degree of readiness to handle crises this year, serving as a test for an economy heavily reliant on oil. Banks focused on maintaining their solidity amid extremely difficult operating conditions.
It highlighted that banks remain the cornerstone of the Kuwaiti economy, as financial activity relies primarily on the banking sector, while local bond and stock markets remain less developed compared to emerging markets.
The report quoted Abdullah Al-Humaidi, an analyst at Moody’s, stating that Kuwait still enjoys strong sovereign financial strength thanks to its substantial reserves, oil wealth, and long track record of supporting the banking sector when needed. He noted that bank assets reached approximately 250% of GDP in 2024, one of the highest ratios in the Gulf, supported by strong balance sheets, high liquidity, and a large Islamic financing sector. The four largest Islamic banks hold assets totaling 53 billion dinars, representing 51% of the total assets of the banking sector.
The report added that assets of listed Kuwaiti banks rose by 12.5% year-on-year to 130.82 billion dinars in the first quarter of 2026, while net profits increased by 1.1% to 382.96 million dinars, according to KPMG data.
**Credit Rating Confidence**
The report emphasized that credit rating agencies maintained their confidence in Kuwaiti banks. In June last year, Moody’s affirmed the long-term deposit ratings of eight Kuwaiti banks, based on strong capital adequacy, high provisions, and liquidity.
It explained that the agency’s baseline scenario, which assumes continued disruption of navigation in the Strait of Hormuz until autumn with high and volatile energy prices, indicates that any deterioration in operating conditions would remain within the banks’ absorption capacity.
The report added that Kuwait’s strong sovereign ratings and high level of government support enhance confidence, as government financial assets exceed 475% of GDP, while public debt stands at only around 19%, providing the government with significant capacity to support the banking sector when needed.
Quoting Al-Humaidi, the report stated that depositor confidence remains stable, and banks continue to access international lending markets. Liquidity reserves support their ability to continue lending and absorb any potential shocks.
**Regulatory Response**
The report noted that the Central Bank of Kuwait acted swiftly in March last year by launching a stimulus package to encourage lending. This included a temporary easing of prudential requirements by lowering the minimum liquidity coverage ratio and the net stable funding ratio from 100% to 80%, as well as reducing the minimum regulatory capital ratio from 18% to 15%.
These measures contributed to accelerating the growth of local credit, which rose to 6.7% year-on-year in May, supported by improved lending to the services, trade, and real estate sectors.
Al-Humaidi explained, according to the report, that many banks focused their lending activity within the Kuwaiti economy, noting that non-oil activity continues to benefit from government investments despite pressures on the hydrocarbon sector.
**Growth Opportunities**
The report believed that credit growth would benefit from improved economic confidence if deposit growth continues, but it expected lending momentum to be slower compared to previous years.
It added that the reforms provide a new opportunity for banks to support economic growth. The Mortgage Financing Law allows for subsidized loans where the state covers the interest payments through the Kuwait Credit Bank, while borrowers repay only the principal.
The report concluded by noting that despite the pressures facing the oil sector this year, Kuwaiti banks are capable of achieving growth by focusing on the non-oil economy and project financing, leveraging their strong capital positions and high liquidity.
