Coverage: weekly note · Information to 19 March 2025
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TGB Weekly Research Note · 19 March 2025
Saudi Arabia and Bahrain matched the Federal Reserve's full percentage point of cuts, Kuwait cut only once, by 25bp, and Egypt held, while fourth-quarter bank margins moved in opposite directions.
The desk view
Rate cuts reached the region on very different terms in late 2024. The Saudi Central Bank (SAMA) cut its repo rate in three steps to 5.00% and the Central Bank of Bahrain its overnight deposit rate from 6.00% to 5.00%, in line with the Federal Reserve's full percentage point of cuts. The Central Bank of Kuwait cut once, by 25bp to 4.00%, and described its approach as gradual and balanced. At bank level, Emirates NBD's net interest margin fell 10bp in the fourth quarter while Al Rajhi Bank's widened by 10bp.
Pegged currencies, full pass-through
The Federal Reserve's 18 December 2024 cut took the federal funds target range to 4.25–4.50%, a full percentage point below its peak. SAMA cut its repo rate by 50bp on 18 September, 25bp on 7 November and 25bp on 18 December, to 5.00%, a cumulative 100bp. The Central Bank of Bahrain cut its overnight deposit rate from 6.00% to 5.50% in September and from 5.25% to 5.00% on 18 December, also 100bp in all. The Central Bank of the UAE, whose Base Rate is anchored to the Fed's interest rate on reserve balances, cut it by 50bp to 4.90% on 18 September and by 25bp to 4.65% on 7 November, each time on the day the Fed cut. For banks in these systems, the policy rate is imported; what matters is how quickly each side of the balance sheet reprices.
Kuwait, Morocco and Egypt set their own pace
The Central Bank of Kuwait, having raised its discount rate by 275bp to 4.25% by July 2023, reversed only 25bp of that, on 19 September 2024. Its statement of 18 December 2024 restated the 4.00% rate and a gradual and balanced approach.
Bank Al-Maghrib cut its key rate by 25bp to 2.50% on 17 December 2024 and said it would decide meeting by meeting. It cut again on 18 March 2025, to 2.25%. It reported that bank lending rates were 35bp lower in the fourth quarter of 2024 than in the second, against a 25bp cut in the key rate.
The Central Bank of Egypt kept its overnight deposit rate at 27.25% on 26 December 2024, judging a tight stance appropriate until inflation, 25.5% in November, declines significantly and sustainably. It held again on 20 February 2025.
Margins move in opposite directions
Emirates NBD's fourth-quarter 2024 net interest margin fell to 3.65% from 3.75%, as rate cuts flowed through to loan pricing. Lower loan yields subtracted 0.42 percentage points, partly offset by deposit costs (0.11 points), treasury and other items (0.13) and DenizBank (0.08). The bank has guided to 3.3–3.5% for 2025, against 3.64% for 2024. Current and savings accounts made up 59% of its group deposits.
Al Rajhi Bank moved the other way: its net financing and investment margin rose to 3.27% in the fourth quarter from 3.17% in the third, and to 3.13% for 2024 from 2.99% in 2023. Its CASA share was 73.4% of customer deposits.
Bank margins as the cuts began
| Bank | Q3 2024 | Q4 2024 | Full-year 2024 | CASA share of deposits |
|---|---|---|---|---|
| Emirates NBD, group | 3.75% | 3.65% | 3.64% | 59% |
| Emirates NBD, excluding DenizBank | n/a | 3.18% | n/a | n/a |
| Al Rajhi Bank | 3.17% | 3.27% | 3.13% | 73.4% |
Source: Emirates NBD, Results Presentation, Full Year 2024, 29 January 2025; Al Rajhi Bank, 4Q 2024 Earnings Release, 29 January 2025.
Saudi and UAE policy rates both fell 75bp through November, yet the two banks' margins diverged. The contrast suggests that NIM sensitivity depended less on the policy path than on how each balance sheet reprices. A bank whose loans reset quickly feels cuts sooner; one whose funding costs ease faster can gain early in the cycle.
What to watch
- 19 March 2025: FOMC policy statement at the end of its 18–19 March meeting.
Primary sources: Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 18 December 2024; Central Bank of Kuwait, Statement on the Local Economic, Financial and Banking Development, 18 December 2024; Emirates NBD, Results Presentation, Full Year 2024, 29 January 2025; Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 18 September 2024; Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 7 November 2024; Central Bank of Bahrain, CBB Cuts Overnight Interest Rate by 50 basis points, 18 September 2024; Central Bank of Bahrain, CBB Cuts Overnight Interest Rate by 25 basis points, 18 December 2024; Board of Governors of the Federal Reserve System, Transcript of Chair Powell's Press Conference, December 18, 2024, 18 December 2024; Al Rajhi Bank, 4Q 2024 Earnings Release, 29 January 2025; Central Bank of Egypt, MPC Press Release 26 December 2024: MPC decides to keep key policy rates unchanged; extends inflation target horizons, 26 December 2024; Central Bank of the UAE (CBUAE), CBUAE Lowers the Base Rate by 50 Basis Points, 18 September 2024; Central Bank of the UAE (CBUAE), CBUAE Lowers the Base Rate by 25 Basis Points, 7 November 2024; Central Bank of Kuwait, Statement on the Local Economic, Financial and Banking Developments, 7 November 2024; Bank Al-Maghrib, Press release: Bank Al-Maghrib Board Meeting (December 2024), 17 December 2024; Bank Al-Maghrib, Press release: Bank Al-Maghrib Board Meeting (March 2025), 18 March 2025; Central Bank of Egypt, MPC Press Release 20 February 2025: MPC decides to keep key policy rates unchanged, 20 February 2025; Board of Governors of the Federal Reserve System, Federal Open Market Committee announces its tentative meeting schedule for 2025 and 2026, 9 August 2024.