UAE and Saudi banks are expected to lead lending activity across the Gulf during 2026, according to a new industry report. GCC Credit Growth will remain supported by strong domestic economies, government investment, and resilient banking sectors despite global economic challenges.
The report forecasts average credit growth between 5 and 6 percent across Gulf banking systems this year. However, banks in the UAE and Saudi Arabia are expected to achieve higher single-digit lending growth. As a result, both countries will outperform the rest of the region.
Government spending on infrastructure continues to play a major role in supporting economic activity. At the same time, strong domestic demand and ongoing development projects encourage businesses and consumers to borrow with confidence.
The report explains that economic growth across the Gulf may slow slightly during 2026. Even so, major investment projects and steady financial conditions should continue supporting lending activity.
In the UAE, several key sectors contribute significantly to economic output. These sectors include tourism, manufacturing, trade, construction, and real estate. Although some industries could face pressure from changing market conditions, government investment should help maintain economic momentum.
Higher oil production also supports the country’s overall economic outlook. Consequently, banks should continue expanding their lending portfolios throughout the year.
Saudi Arabia also benefits from strong economic activity and continued investment. Large development projects and economic diversification programs continue creating financing opportunities across multiple industries.
The report highlights the strength of Gulf banks’ financial positions. The region’s largest banks maintain solid capital levels, allowing them to manage risks while supporting future lending.
Average Tier 1 capital ratios remained around 17 percent at the end of the first quarter of 2026. These strong capital buffers provide additional confidence for investors and financial institutions.
Asset quality also remains healthy across the Gulf banking sector. Non-performing loan ratios stayed broadly stable at about 2.6 percent. Furthermore, many UAE banks strengthened their financial provisions to reinforce their balance sheets against future uncertainties.
Liquidity conditions continue improving throughout the region. During the first quarter of 2026, deposit growth exceeded credit growth, strengthening funding positions for many banks.
Governments and public sector institutions also injected substantial funds into Gulf banking systems during the opening months of the year. These additional deposits further enhanced financial stability and supported lending capacity.
Liquid assets account for roughly one-fifth of total banking assets across the region. Therefore, banks maintain enough liquidity to respond quickly to changing market conditions.
The report notes that UAE banks possess strong external liquidity positions. This financial strength allows them to manage potential market volatility while continuing to finance businesses and consumers.
Most banking outlooks across the Gulf remain stable. This reflects confidence in the sector’s ability to withstand external economic pressures while maintaining healthy financial performance.
Although profitability may ease slightly over the next two years, banks should remain financially resilient. Slower credit expansion and higher provisioning costs may reduce earnings growth. Nevertheless, strong operating efficiency and lower funding costs continue supporting performance.
The report expects UAE and Saudi banks to remain among the region’s strongest performers. Their larger domestic economies, efficient operations, and diversified funding sources provide important competitive advantages.
GCC Credit Growth should continue benefiting from strong capital positions, healthy liquidity, and prudent risk management. These strengths will help banks support businesses, finance development projects, and contribute to long-term economic growth.
Overall, GCC Credit Growth is expected to remain resilient throughout 2026 as UAE and Saudi banks benefit from strong capital, healthy liquidity, and continued government investment. With stable banking fundamentals and sustained lending activity, the Gulf’s financial sector is well positioned to support economic diversification and long-term regional growth.
