Coverage: Q2 2025 · Information to 9 October 2025
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TGB Quarterly Regional Banking Monitor · 9 October 2025
Four Gulf central banks followed the Federal Reserve's 25bp cut on 17 September 2025 while Egypt took its overnight deposit rate down to 21.00%, and Saudi bank credit grew about twice as fast as deposits in the year to the second quarter.
The desk view
The second quarter of 2025 left MENA banking split between Gulf systems that move with the Federal Reserve and an Egyptian easing cycle driven by disinflation. When the Fed cut by 25bp on 17 September 2025, SAMA, the CBUAE, the Central Bank of Kuwait and the Central Bank of Bahrain each cut by 25bp. Egypt's central bank cut its overnight deposit rate from 25.00% after the April decision to 21.00% on 2 October. The structural issue is in Saudi Arabia, where bank credit rose 15.8% year on year in the second quarter against 7.7% for deposits, leaving credit at 110.8% of deposits. UAE banks, by contrast, grew deposits faster than credit and held a capital adequacy ratio of 17.3%. Bank earnings were strong, although Emirates NBD's first-half profit fell 9% as its tax charge rose 40%.
The regional picture
Monetary policy in the region moved on separate tracks in 2025. The four Gulf central banks covered here moved in step with the Federal Reserve. On 17 September 2025 the Federal Open Market Committee lowered the federal funds target range by 25bp to 4.00–4.25%. The same day SAMA cut its repo rate by 25bp to 4.75% and its reverse repo rate to 4.25%, citing global developments. The CBUAE cut the Base Rate on its Overnight Deposit Facility from 4.40% to 4.15%, effective 18 September, and said the move followed the Federal Reserve's cut to the interest rate on reserve balances. The Central Bank of Kuwait cut its discount rate from 4.00% to 3.75%, and the Central Bank of Bahrain cut its overnight deposit rate from 5.00% to 4.75%, both effective 18 September. The CBUAE's previous cut had come on 18 December 2024, so its 4.40% Base Rate was in force from 19 December 2024 until the September 2025 decision.
Egypt followed its own cycle. The Central Bank of Egypt (CBE) began easing on 17 April 2025 with a 225bp cut that took the overnight deposit rate to 25.00%. It cut by a further 100bp on 22 May, held on 10 July, cut by 200bp on 28 August and cut by 100bp on 2 October, taking the overnight deposit rate to 21.00%. The cumulative reduction since April was 625bp. Morocco stood still: Bank Al-Maghrib kept its policy rate at 2.25% on 23 September 2025, with inflation averaging 1.1% over the first eight months of the year.
Policy rates after the last decision on or before 9 October 2025, %
Source: Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement (17 September 2025), 17 September 2025; Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 17 September 2025; Central Bank of the UAE (CBUAE), المصرف المركزي يخفض سعر الأساس بواقع 25 نقطة أساس (CBUAE lowers the Base Rate by 25 basis points), Arabic press release, 17 September 2025; Central Bank of Kuwait (CBK), CBK Cuts Discount Rate by 25 Basis Points to 3.75%, 17 September 2025; Central Bank of Bahrain (CBB), CBB Cuts Overnight Interest Rate by 25 basis points, 17 September 2025; Central Bank of Egypt (CBE), MPC Press Release 2 October 2025, 2 October 2025; Bank Al-Maghrib (BAM), Communiqué de presse, Réunion du Conseil de Bank Al-Maghrib, 23 septembre 2025, 23 September 2025; Saudi Central Bank (SAMA), Key Economic Developments, Second Quarter 2025, 5 October 2025; Central Bank of the UAE (CBUAE), Quarterly Monetary, Banking & Financial Markets Developments Report, 2025 – 2nd Quarter, 31 August 2025; Al Rajhi Bank, 2Q 2025 Earnings Release, 21 July 2025.
The banking data that follow use different reference dates: Saudi and UAE system figures refer to the second quarter of 2025, Kuwaiti figures to July 2025 and bank results to the first half of 2025.
Saudi Arabia: lending runs ahead of deposits
SAMA's quarterly review puts preliminary real GDP growth at 3.9% year on year in the second quarter of 2025, with non-oil activities up 4.6% and oil activities up 3.8%. Average consumer price inflation was 2.0% in the quarter. Arab Light averaged USD 68.9 per barrel, 21.1% lower than a year earlier.
Bank credit to the private and public sectors rose 15.8% year on year and 2.7% on the quarter to SAR 3,186.3 billion. Credit to the private sector grew about 14.1% to SAR 2,959.4 billion, and credit to the public sector about 42.6% to SAR 226.8 billion. Real estate loans rose 14.5% to SAR 932.8 billion, or 29.3% of bank credit, while consumer loans grew only 3.9% to SAR 469.8 billion.
Deposits did not keep pace. Total bank deposits rose 7.7% year on year to SAR 2,875.7 billion at the end of the quarter. Credit growth therefore exceeded deposit growth by 8.1 percentage points. The mix also shifted towards time and savings deposits: these rose about 21.7% to SAR 1,099.9 billion, against about 5.2% for demand deposits, which reached SAR 1,495.3 billion.
Saudi banking aggregates, Q2 2025
| Indicator | Level (SAR billion) | Year-on-year change |
|---|---|---|
| Bank credit, total | 3,186.3 | 15.8% |
| Credit to private sector | 2,959.4 | 14.1% |
| Credit to public sector | 226.8 | 42.6% |
| Real estate loans | 932.8 | 14.5% |
| Consumer loans | 469.8 | 3.9% |
| Bank deposits, total | 2,875.7 | 7.7% |
| Time and savings deposits | 1,099.9 | 21.7% |
| Demand deposits | 1,495.3 | 5.2% |
| Broad money (M3) | 3,120.0 | 7.6% |
Source: Saudi Central Bank (SAMA), Key Economic Developments, Second Quarter 2025, 5 October 2025.
The gap shows up in Al Rajhi Bank's balance sheet. At Al Rajhi Bank, net financing rose 19.3% year on year to SAR 741,715 million at the end of June 2025, while customers' deposits rose 3.1% to SAR 641,987 million. Amounts due to banks and other financial institutions rose 139.6% to SAR 210,141 million over the same period. Earnings did not suffer: net income after zakat rose 32.5% to SAR 12,057 million in the first half of 2025, and the net financing and investment margin widened to 3.14% from 3.03%. The bank reported a non-performing loan ratio of 0.74%, a Tier 1 ratio of 19.4% and a liquidity coverage ratio of 152.9%. SAMA has started to build a macroprudential cushion. On 22 May 2025 it decided to raise the countercyclical capital buffer from 0% to 1% of total risk-weighted assets, with banks required to comply from 25 May 2026.
United Arab Emirates: deposits keep up with credit
The UAE system shows the opposite balance. According to the CBUAE's quarterly developments report, total assets of banks operating in the UAE rose 5.4% on the quarter and 15.4% year on year to AED 4,973.3 billion at the end of June 2025. Gross credit increased 4.2% on the quarter to AED 2,334.3 billion, an annual increase of 11.1%. Total deposits rose 13.1% year on year to AED 3,045.8 billion, with non-resident deposits up 16.0% to AED 257.2 billion. Deposit growth therefore exceeded credit growth by 2.0 percentage points, and gross credit equalled 76.6% of deposits. Personal loans to residents grew faster than the total, up 16.7% to AED 526.0 billion.
Capital ratios eased as balance sheets expanded. The capital adequacy ratio was 17.3% in the second quarter of 2025, against 18.3% a year earlier and 17.6% in the first quarter, still above the 13.0% minimum that includes the 2.5% capital conservation buffer. The CET1 ratio was 14.6%, against 15.3% a year earlier. Aggregate capital and reserves rose 10.2% year on year to AED 545.7 billion.
UAE banking indicators, Q2 2025
| Indicator | Q2 2025 | Comparison |
|---|---|---|
| Total assets | AED 4,973.3bn | +15.4% year on year |
| Gross credit | AED 2,334.3bn | +11.1% year on year |
| Personal loans to residents | AED 526.0bn | +16.7% year on year |
| Total deposits | AED 3,045.8bn | +13.1% year on year |
| Capital and reserves | AED 545.7bn | +10.2% year on year |
| Capital adequacy ratio | 17.3% | 18.3% in Q2 2024 |
| CET1 ratio | 14.6% | 15.3% in Q2 2024 |
Results at Emirates NBD and First Abu Dhabi Bank show strong volumes but different bottom lines. Emirates NBD's first-half income rose 12% to AED 23.9 billion, yet profit before tax fell 3% to AED 15.4 billion and profit fell 9% to AED 12.5 billion as tax rose 40% to AED 2.9 billion. The bank said its half-year profit was achieved despite the impact of the new higher tax rate. Tax took 18.8% of profit before tax in the first half of 2025, against 13.2% a year earlier. Its gross loans grew 12% year on year to AED 570 billion and deposits 18% to AED 737 billion, and its non-performing loan ratio fell to 2.8% from 4.2%. First Abu Dhabi Bank's net profit rose 26% to AED 10.63 billion, with profit before tax up 29% to AED 12.83 billion. Both banks reported lower margins: FAB's net interest margin fell 6bp to 1.88%, which it attributed to lower benchmark rates, and Emirates NBD's fell to 3.47% from 3.59%.
Egypt: rapid easing as inflation slows
Disinflation drove the CBE's decisions. Annual headline inflation slowed to 12.0% in August 2025 from 13.9% in July, and core inflation to 10.7% from 11.6%. The September reading came in at 11.7% for urban headline inflation, while core inflation rose to 11.3%. The CBE expects inflation to average 12–13% in the third quarter, down from 15.2% in the second, and to converge on its target range in the fourth quarter of 2026. Real GDP growth accelerated to 5.0% in the second quarter of 2025 from 4.8% in the previous quarter.
CBE policy decisions, April to October 2025
| Meeting | Decision | Overnight deposit rate after decision |
|---|---|---|
| 17 April 2025 | Cut 225bp | 25.00% |
| 22 May 2025 | Cut 100bp | 24.00% |
| 10 July 2025 | Hold | 24.00% |
| 28 August 2025 | Cut 200bp | 22.00% |
| 2 October 2025 | Cut 100bp | 21.00% |
Source: Central Bank of Egypt (CBE), MPC Press Release 17 April 2025, 17 April 2025; Central Bank of Egypt (CBE), MPC Press Release 22 May 2025, 22 May 2025; Central Bank of Egypt (CBE), MPC Press Release 10 July 2025, 10 July 2025; Central Bank of Egypt (CBE), MPC Press Release 28 August 2025, 28 August 2025; Central Bank of Egypt (CBE), MPC Press Release 2 October 2025, 2 October 2025.
The overnight deposit rate of 21.00% sits 9.3 percentage points above September headline inflation. The CBE's monetary policy report shows that around 65% of the 325bp of cuts in April and May 2025 reached the interbank market during the second quarter. Real growth of local-currency loans to the private sector averaged 12.6% in the second quarter, up from 10.1% in the first. The CBE has said it will set the size and pace of further easing meeting by meeting.
Kuwait, Bahrain and Morocco
The Central Bank of Kuwait's 17 September announcement cited a slowdown in inflation from 3.00% in July 2024 to 2.39% in July 2025. It reported resident deposits up 4.2% year on year at the end of July 2025. The Central Bank of Bahrain cut its overnight deposit rate by 25bp to 4.75% as part of measures to maintain monetary and financial stability.
In Morocco, Bank Al-Maghrib reported that lending rates on bank loans to the non-financial sector had fallen a cumulative 59bp since easing began in June 2024, against 75bp for the policy rate. That is a pass-through of 78.7%. The central bank projects bank credit to the non-financial sector to grow 5.9% in 2025 and 2026, against an average of 2.7% in the previous two years, and growth to accelerate from 3.8% in 2024 to 4.6% in 2025.
Cross-country comparison
Selected bank results, first half of 2025
| Bank | Net profit | Change y/y | Loan growth y/y | Deposit growth y/y | NPL ratio | Capital |
|---|---|---|---|---|---|---|
| Al Rajhi Bank | SAR 12,057m | +32.5% | 19.3% | 3.1% | 0.74% | Tier 1 19.4% |
| Emirates NBD | AED 12.5bn | -9% | 12% | 18% | 2.8% | CET1 14.7% |
| First Abu Dhabi Bank | AED 10.63bn | +26% | 11% | 6% | 2.84% | CET1 13.4% |
Source: Al Rajhi Bank, 2Q 2025 Earnings Release, 21 July 2025; Emirates NBD, Emirates NBD's income surges 12% to AED 23.9 billion on strong loan growth, regional expansion and innovative product offering (H1 2025 results press release), 24 July 2025; First Abu Dhabi Bank (FAB), Management Discussion & Analysis for the six-month period ended 30 June 2025, 23 July 2025.
MENA banking monitor: policy and system indicators (reference dates in brackets)
| Country | Policy rate (latest decision) | Credit | Deposits | Capital and prudential | Inflation |
|---|---|---|---|---|---|
| Saudi Arabia | Repo 4.75% (17 Sep 2025) | +15.8% y/y (Q2 2025) | +7.7% y/y (Q2 2025) | CCyB rising to 1% (25 May 2026) | 2.0% (Q2 2025) |
| UAE | Base Rate 4.15% (17 Sep 2025) | +11.1% y/y (Q2 2025) | +13.1% y/y (Q2 2025) | CAR 17.3% (Q2 2025) | Not available |
| Egypt | Deposit rate 21.00% (2 Oct 2025) | Real LC private loans +12.6% (Q2 2025 average) | Not available | Not available | 11.7% (Sep 2025) |
| Kuwait | Discount rate 3.75% (17 Sep 2025) | Not available | Resident deposits +4.2% (Jul 2025) | Not available | 2.39% (Jul 2025) |
| Bahrain | Overnight deposit 4.75% (17 Sep 2025) | Not available | Not available | Not available | Not available |
| Morocco | 2.25% (23 Sep 2025) | Projected +5.9% in 2025 | Not available | Not available | 1.1% (average, first eight months of 2025) |
Source: Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 17 September 2025; Saudi Central Bank (SAMA), Key Economic Developments, Second Quarter 2025, 5 October 2025; Saudi Central Bank (SAMA), Update of the Countercyclical Capital Buffer (CCyB) Rate, Circular No. 106905636 (SAMA Rulebook), 22 May 2025; Central Bank of the UAE (CBUAE), المصرف المركزي يخفض سعر الأساس بواقع 25 نقطة أساس (CBUAE lowers the Base Rate by 25 basis points), Arabic press release, 17 September 2025; Central Bank of the UAE (CBUAE), Quarterly Monetary, Banking & Financial Markets Developments Report, 2025 – 2nd Quarter, 31 August 2025; Central Bank of Egypt (CBE), MPC Press Release 2 October 2025, 2 October 2025; Central Bank of Egypt (CBE), Monetary Policy Report Q2 2025, 5 August 2025; Central Bank of Egypt (CBE), CPI Press Release September 2025, 8 October 2025; Central Bank of Kuwait (CBK), CBK Cuts Discount Rate by 25 Basis Points to 3.75%, 17 September 2025; Central Bank of Bahrain (CBB), CBB Cuts Overnight Interest Rate by 25 basis points, 17 September 2025; Bank Al-Maghrib (BAM), Communiqué de presse, Réunion du Conseil de Bank Al-Maghrib, 23 septembre 2025, 23 September 2025.
Saudi Arabia and the UAE both expanded credit at double-digit rates, but only the UAE funded that growth with faster deposit growth. Among the three banks, Al Rajhi Bank combined the fastest loan growth with the slowest deposit growth, while Emirates NBD's deposits grew faster than its loans. Asset quality was not the constraint: the reported non-performing loan ratios ranged from 0.74% at Al Rajhi Bank to 2.84% at FAB.
Outlook risks
For Saudi banks, the funding gap is the risk to watch: credit stood at 110.8% of deposits, time and savings deposits grew fastest, and the countercyclical buffer will raise capital requirements from May 2026. For UAE banks, the 25bp September cut follows a first half in which FAB attributed its lower margin to lower benchmark rates, Emirates NBD's margin also narrowed and the new higher tax rate weighed on Emirates NBD's profit. In Egypt, the CBE has warned that larger-than-planned changes to administered prices and escalating regional geopolitical tensions are upside risks to inflation, and September core inflation of 11.3% was above August's 10.7%.
What to watch
- 15 October 2025: the CBE publishes its monthly inflation note for September 2025.
- 25 May 2026: Saudi banks must apply the 1% countercyclical capital buffer set by SAMA.
- Q4 2026: the CBE's inflation target of 7% (±2 percentage points), on average, falls due.
Primary sources: Saudi Central Bank (SAMA), Key Economic Developments, Second Quarter 2025, 5 October 2025; Central Bank of the UAE (CBUAE), Quarterly Monetary, Banking & Financial Markets Developments Report, 2025 – 2nd Quarter, 31 August 2025; Central Bank of Egypt (CBE), MPC Press Release 2 October 2025, 2 October 2025; Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement (17 September 2025), 17 September 2025; Saudi Central Bank (SAMA), SAMA's Decision on Repo and Reverse Repo Rates, 17 September 2025; Central Bank of the UAE (CBUAE), المصرف المركزي يخفض سعر الأساس بواقع 25 نقطة أساس (CBUAE lowers the Base Rate by 25 basis points), Arabic press release, 17 September 2025; Central Bank of Egypt (CBE), CPI Press Release September 2025, 8 October 2025; Central Bank of Kuwait (CBK), CBK Cuts Discount Rate by 25 Basis Points to 3.75%, 17 September 2025; Central Bank of Bahrain (CBB), CBB Cuts Overnight Interest Rate by 25 basis points, 17 September 2025; Central Bank of Egypt (CBE), MPC Press Release 17 April 2025, 17 April 2025; Al Rajhi Bank, 2Q 2025 Earnings Release, 21 July 2025; First Abu Dhabi Bank (FAB), Management Discussion & Analysis for the six-month period ended 30 June 2025, 23 July 2025; Emirates NBD, Emirates NBD's income surges 12% to AED 23.9 billion on strong loan growth, regional expansion and innovative product offering (H1 2025 results press release), 24 July 2025; Central Bank of the UAE (CBUAE), المصرف المركزي يخفض سعر الأساس بواقع 25 نقطة أساس (CBUAE lowers the Base Rate by 25 basis points), Arabic press release of 18 December 2024, 18 December 2024; Central Bank of Egypt (CBE), MPC Press Release 22 May 2025, 22 May 2025; Central Bank of Egypt (CBE), MPC Press Release 10 July 2025, 10 July 2025; Central Bank of Egypt (CBE), MPC Press Release 28 August 2025, 28 August 2025; Central Bank of Egypt (CBE), Monetary Policy Report Q2 2025, 5 August 2025; Bank Al-Maghrib (BAM), Communiqué de presse, Réunion du Conseil de Bank Al-Maghrib, 23 septembre 2025, 23 September 2025; Saudi Central Bank (SAMA), Update of the Countercyclical Capital Buffer (CCyB) Rate, Circular No. 106905636 (SAMA Rulebook), 22 May 2025.