RIYADH: Gross lending by 55 listed Gulf Cooperation Council banks reached a record $2.59 trillion at the end of the second quarter of 2026, rising 2.6 percent from the preceding three months and 11.6 percent year on year, according to Kamco Invest.

The quarterly increase accelerated from 2.2 percent in the first quarter, with all six GCC markets recording growth.  

Net loans advanced 2.7 percent to $2.51 trillion, while Islamic banks increased financing by 3.3 percent, compared with 2.4 percent growth among conventional lenders.

GCC banks are entering the second half of 2026 in a changing interest-rate environment, with easing rates and slower credit growth likely to increase the importance of loan volumes and fee-generating activities in supporting earnings. Resilient regional economies and sustained demand for financing are expected to provide support as lenders adjust to these conditions.

UAE-listed banks led the expansion for a second consecutive quarter, with gross loans rising 4.5 percent to $816.5 billion. The increase was partly driven by Emirates NBD’s acquisition of a majority stake in India’s RBL Bank, which added 44 billion Emirati dirhams ($12 billion) of loans to the group.

As lending regained momentum, Kamco said business volumes were becoming increasingly important to banks’ income generation. “With the bulk of repricing now behind them, banks are relying on volume rather than rate to grow the interest line,” the report said.

Country trends

Saudi-listed banks increased gross lending by 1.6 percent during the quarter to $876.1 billion.  

Saudi Central Bank data cited by Kamco showed private-sector credit growing 6.8 percent year on year in June, down from rates of between 16 percent and 18 percent during much of 2025, as retail mortgage growth moderated and new lending shifted toward corporate borrowers.

Omani banks recorded the region’s second-fastest quarterly increase, with loans rising 4.1 percent to $88.2 billion. Kuwaiti lenders reported growth of 2.3 percent to $290.6 billion, while Bahraini and Qatari banks registered increases of 1.9 percent and 1.4 percent, respectively.

Funding and earnings

Customer deposits at listed GCC banks rose 1.7 percent during the quarter to a record $2.92 trillion, slower than the increase in lending.  

Aggregate net profit reached a record $17.7 billion in the second quarter, increasing 5.6 percent quarter on quarter and 7.2 percent year on year, according to the banking report.

Total banking revenue reached $36.2 billion, up 2.4 percent from the first quarter. Non-interest income increased 3.6 percent to $11.3 billion and represented 31.2 percent of revenue, while net interest income rose 1.9 percent to a record $24.9 billion. The regional net interest margin edged down to 2.78 percent from 2.79 percent.

Sector outlook

S&P Global Ratings forecast average GCC bank credit growth of between 5 and 6 percent in 2026, with stronger high-single-digit growth expected in Saudi Arabia and the UAE.  

It expects profitability to decline slightly in 2026 and 2027 because of higher credit costs and slower lending growth, while banks’ capital buffers should support their financial resilience.

Kamco said the funding gap was increasing banks’ use of wholesale debt markets. Saudi issuers raised $49.3 billion through bonds and sukuk during the first half of 2026, accounting for close to half of total GCC issuance over the period, with corporate entities contributing the majority of the regional total.