TGB Regional Banking Monitor: MENA — Q1 2025

The regional picture

The Gulf picture starts with the Federal Reserve. The Saudi Central Bank (SAMA) cut its repo rate by 25bp to 5.00% on 18 December 2024. The Federal Reserve held its 4.25–4.50% range on 19 March 2025, noting that uncertainty around the outlook had increased, and again on 18 June, when it said uncertainty had diminished but remained elevated. The Central Bank of the UAE (CBUAE), which anchors its Base Rate to the Federal Reserve's rate on reserve balances, kept the Base Rate at 4.40% on 19 March and 18 June. The Federal Reserve had kept that reserve-balance rate at 4.4%, effective 20 March 2025, so the UAE floor rate matched it exactly. The Central Bank of Bahrain kept its overnight deposit rate at 5.00% on 18 June 2025, and Kuwait's discount rate stood at 4.00% after a 25bp cut effective 19 September 2024.

North Africa diverged. The Central Bank of Egypt (CBE) held its overnight deposit rate at 27.25% on 20 February 2025, then cut it by 225bp on 17 April and by 100bp on 22 May, to 24.00%. Bank Al-Maghrib cut its key rate by 25bp to 2.25% on 18 March 2025 and held it on 24 June. Oil was a common backdrop. In April the CBE noted that oil prices had declined significantly on supply-side factors and expected softer global demand. In June, Bank Al-Maghrib forecast Brent at USD 66.8 per barrel in 2025, against USD 79.8 in 2024, citing higher OPEC+ production.

Saudi Arabia: a capital buffer for an expanding system

SAMA's measures in the first half of 2025 were prudential and structural. On 28 January 2025 it allowed STC Bank, a licensed digital bank, to begin operations. On 25 February it issued close-out netting and related collateral regulations, effective immediately for all institutions it supervises. In a circular dated 22 May 2025, it raised the countercyclical capital buffer from 0% to 1% of total risk-weighted assets, with banks required to comply from 25 May 2026. On 19 June it announced updated credit card rules intended to improve disclosure and to reduce the cost of credit cards for consumers.

Saudi Arabia: SAMA measures, January to June 2025

Source: Saudi Central Bank (SAMA), STC Bank launches its banking operations, 28 January 2025; Saudi Central Bank (SAMA), Close-out netting regulations, 25 February 2025; Saudi Central Bank (SAMA), Update of the countercyclical capital buffer rate, 22 May 2025; Saudi Central Bank (SAMA), Updated credit card rules, 19 June 2025.

SAMA's own data show how fast the system was expanding when it set the buffer. Bank credit to the private and public sectors rose 16.3% year on year and 5.0% in the quarter to SAR 3,102.0 billion at the end of Q1 2025, while total bank deposits rose 8.0% year on year to SAR 2,804.3 billion. Credit was therefore equal to 110.6% of deposits. Private-sector credit rose 14.9% and public-sector credit 38.0%, while real estate loans rose 15.2% to SAR 922.2 billion, 29.7% of all bank credit. Al Rajhi Bank's results reflect the same growth. The bank reported first-quarter 2025 net profit of SAR 5,906 million, up 34% from SAR 4,405 million a year earlier, on operating income of SAR 9,200 million, up 27%. Total assets rose about 22% to SAR 1,023 billion, with financing up 19% and investments up 25% on the same quarter of 2024. Customer deposits reached SAR 629 billion; return on assets was 2.4% and return on equity 23.1%. The bank also issued USD 1.5 billion of sustainable additional tier 1 sukuk in the quarter, with coverage exceeding 200%.

United Arab Emirates: credit growth with thinner capital ratios

Total assets of banks operating in the UAE rose 3.5% in the first quarter of 2025 to AED 4,719.4 billion. Gross credit rose 2.7% in the quarter to AED 2,240.0 billion, an annual increase of 9.4%, while customer deposits rose 3.1% to AED 2,936.4 billion, up 10.5% on the year. Gross credit was therefore equal to 76.3% of deposits at the end of March 2025. In March alone, gross credit rose 1.6%, with domestic credit up AED 19.5 billion and foreign credit up AED 16.2 billion. Personal loans to residents grew 17.5% on the year, almost twice as fast as gross credit. Capital did not keep pace: aggregate capital and reserves fell 1.8% in the quarter, and the capital adequacy ratio slipped to 17.6%, against a 13.0% minimum that includes the 2.5% capital conservation buffer. The ratio was 0.4 percentage point lower than a year earlier, and the Tier 1 ratio was 16.2%.

UAE banking indicators

Source: Central Bank of the UAE (CBUAE), Quarterly monetary and banking developments, Q1 2025, 31 May 2025.

Bank results show volume growth alongside a higher tax charge. Emirates NBD's first-quarter profit before tax rose 2% year on year to AED 7.8 billion, but net profit fell 7% to AED 6.2 billion as tax rose 80% to AED 1.5 billion. Its loans grew AED 18 billion in the quarter, over half of it from its international network, and its non-performing loan ratio fell to 3.1% from 4.4% a year earlier, with impaired-loan coverage of 158%. The bank said investment in its regional footprint, digital services and GenAI was helping to offset lower interest rates. First Abu Dhabi Bank (FAB) reported net profit of AED 5.13 billion, up 23%, and said 11% growth in operating income largely offset the increase in UAE corporate tax. Its loans rose 8% and deposits 4% on the year, its net interest margin rose 4bp in the quarter to 1.97%, and its CET1 ratio was 13.5%.

Kuwait and Bahrain

The Central Bank of Kuwait cut its discount rate from 4.25% to 4.00%, effective 19 September 2024, noting that inflation had slowed to 3.00% in July 2024. Kuwait Finance House reported first-quarter 2025 net profit attributable to shareholders of KD 168.1 million, up 3.2%, with net financing income up 21.1% and a capital adequacy ratio of 19.38%. Its financing receivables rose only 1.1% from the end of 2024, to KD 19.3 billion, while depositors' accounts rose 1.3% to KD 19.5 billion. On 4 June 2025 the central bank issued a draft open banking framework for four weeks of consultation, with services to be launched in phases once it is final. In Bahrain, the central bank kept its overnight deposit rate at 5.00% on 18 June 2025.

Egypt: disinflation opens the easing cycle

The CBE held its key rates on 20 February 2025, when annual headline inflation was 24.0% in January. Disinflation then came quickly. Headline inflation was 12.8% in February and 13.6% in March, and core inflation fell to 9.4% in March from 10.0% in February. The CBE said headline inflation fell by approximately 9.0 percentage points in the first quarter of 2025, which significantly tightened the monetary stance and gave ample room to begin easing; food inflation fell from 45.0% in March 2024 to 6.6% in March 2025. On 17 April the Committee cut its three key rates by 225bp, taking the overnight deposit rate to 25.00%, and on 22 May it cut a further 100bp, to 24.00%. The CBE targets inflation of 7% plus or minus 2 percentage points on average in Q4 2026. Its nowcast put real GDP growth at around 5.0% in Q1 2025, against 4.3% in Q4 2024, and unemployment eased to 6.3% in Q1 2025. In May the CBE judged that upside risks to inflation had eased, citing unwinding trade tensions, exchange-rate dynamics and the normalisation of sovereign risk levels.

Egypt: CBE key rates by decision

Source: Central Bank of Egypt (CBE), MPC press release, 20 February 2025; Central Bank of Egypt (CBE), MPC press release, 17 April 2025; Central Bank of Egypt (CBE), MPC press release, 22 May 2025.

Headline inflation then rose to 16.8% in May from 13.9% in April, and core inflation to 13.1% from 10.4%, though the overnight deposit rate of 24.00% still exceeded headline inflation by 7.2 percentage points. On 11 March 2025 the IMF completed the fourth review of Egypt's Extended Fund Facility, enabling a drawing of about US$1.2 billion, and approved a Resilience and Sustainability Facility arrangement with access of about US$1.3 billion. Banks entered the easing cycle with ample buffers: the capital adequacy ratio was 19.1% at the end of Q3 2024, non-performing loans were 2.4% of total loans and the loan-to-deposit ratio was 61.3%. Provision coverage of non-performing loans was 87.4%, local and foreign currency liquidity ratios were 32.1% and 77.7%, and return on equity was 32.2% at the end of FY2023. The low loan-to-deposit ratio leaves room for lending to grow as rates fall.

Morocco: cuts reach borrowers slowly

Bank Al-Maghrib cut its key rate to 2.25% on 18 March 2025, its third cut since June 2024, after inflation averaged 0.9% in 2024 and core inflation 2.2%. Bank lending rates to the non-financial sector fell 35bp between Q2 and Q4 2024, while the key rate fell 25bp, and data for the first quarter of 2025 showed a cumulative 45bp decline since easing began. The Bank is also rolling out a programme that refinances banks' lending to very small enterprises at the key rate minus 25bp. On 24 June the Board held at 2.25%, citing significant uncertainties, after inflation slowed from 2% on average in the first quarter of 2025 to 0.7% in April and 0.4% in May. That left a real policy rate of 1.85 percentage points on May inflation. It projected bank credit to the non-financial sector to grow by more than 6% in 2025, against an average of 2.7% over the previous two years.

Cross-country comparison

MENA banking monitor: policy rates and banking indicators

Source: Saudi Central Bank (SAMA), Decision on repo and reverse repo rates, 18 December 2024; Saudi Central Bank (SAMA), Key Economic Developments, First Quarter 2025, 19 June 2025; Saudi Central Bank (SAMA), Update of the countercyclical capital buffer rate, 22 May 2025; Al Rajhi Bank, First-quarter 2025 results, 22 April 2025; Central Bank of the UAE (CBUAE), Base Rate decision, 18 June 2025; Central Bank of the UAE (CBUAE), Quarterly monetary and banking developments, Q1 2025, 31 May 2025; Emirates NBD, Q1 2025 results, 22 April 2025; Central Bank of Kuwait (CBK), Discount rate decision, 18 September 2024; Kuwait Finance House (KFH), Q1 2025 results, 21 April 2025; Central Bank of Bahrain (CBB), Overnight rate decision, 18 June 2025; Central Bank of Egypt (CBE), MPC press release, 22 May 2025; Central Bank of Egypt (CBE), Financial soundness indicators, 8 January 2025; Bank Al-Maghrib, Board meeting press release, 24 June 2025.

The gap between Egypt's overnight deposit rate and the UAE Base Rate narrowed by 325bp over the period but stayed wide, at 24.00% against 4.40%. Among the returns available, Al Rajhi's 23.1% return on equity and Emirates NBD's 21.8% return on tangible equity compare with an Egyptian system return on equity of 32.2% for FY2023. The comparison is uneven because reference dates and coverage differ, but it points to the same pattern: Gulf balance sheets are expanding on stable policy rates, while in Morocco the faster credit growth expected from lower rates is still a projection.

Outlook risks

In the UAE, whose Base Rate is anchored to the Federal Reserve's reserve-balance rate, policy will follow Washington, where the Federal Reserve in June described uncertainty as diminished but still elevated. Lower oil prices are a regional macro risk, and Bank Al-Maghrib cited an exceptional level of uncertainty from US trade policy and the war between Israel and Iran. In Egypt, the rebound in headline inflation to 16.8% in May tests the pace of further cuts against the CBE's target of 7% plus or minus 2 percentage points for Q4 2026. In Morocco, the test is whether credit to the non-financial sector accelerates to the more than 6% growth that Bank Al-Maghrib projects for 2025. In the UAE, 17.5% annual growth in personal loans and a falling capital ratio make household credit the indicator to follow. Higher tax charges are absorbing part of UAE bank earnings growth, as the Emirates NBD and FAB results show.

Primary sources: Central Bank of the UAE (CBUAE), Quarterly monetary and banking developments, Q1 2025, 31 May 2025; Board of Governors of the Federal Reserve System, FOMC statement, 18 June 2025; Central Bank of the UAE (CBUAE), Base Rate decision, 18 June 2025; Central Bank of Bahrain (CBB), Overnight rate decision, 18 June 2025; Central Bank of Egypt (CBE), MPC press release, 17 April 2025; Bank Al-Maghrib, Board meeting press release, 18 March 2025; Central Bank of Egypt (CBE), CPI press release, March 2025, 10 April 2025; Central Bank of Egypt (CBE), MPC press release, 22 May 2025; Saudi Central Bank (SAMA), Key Economic Developments, First Quarter 2025, 19 June 2025; Board of Governors of the Federal Reserve System, FOMC statement, 19 March 2025; Central Bank of the UAE (CBUAE), Base Rate decision, 19 March 2025; Saudi Central Bank (SAMA), Update of the countercyclical capital buffer rate, 22 May 2025; Bank Al-Maghrib, Board meeting press release, 24 June 2025; Central Bank of Egypt (CBE), CPI press release, May 2025, 4 June 2025; Saudi Central Bank (SAMA), Decision on repo and reverse repo rates, 18 December 2024; Board of Governors of the Federal Reserve System, Implementation note, 19 March 2025; Central Bank of Kuwait (CBK), Discount rate decision, 18 September 2024; Central Bank of Egypt (CBE), MPC press release, 20 February 2025; Saudi Central Bank (SAMA), STC Bank launches its banking operations, 28 January 2025; Saudi Central Bank (SAMA), Close-out netting regulations, 25 February 2025; Saudi Central Bank (SAMA), Updated credit card rules, 19 June 2025; Al Rajhi Bank, First-quarter 2025 results, 22 April 2025; Central Bank of the UAE (CBUAE), Monetary and banking developments, March 2025, 8 May 2025; Emirates NBD, Q1 2025 results, 22 April 2025; First Abu Dhabi Bank (FAB), Q1 2025 results, 29 April 2025; Kuwait Finance House (KFH), Q1 2025 results, 21 April 2025; Central Bank of Kuwait (CBK), Draft open banking framework, 4 June 2025; International Monetary Fund, Egypt: fourth EFF review (PR 25/58), 11 March 2025; Central Bank of Egypt (CBE), Financial soundness indicators, 8 January 2025.