Executive Summary
The GCC banking sector enters 2026 with a positive outlook, underpinned by resilient macroeconomic growth and accelerating non-hydrocarbon reforms across the region. The transition to lower interest rates is expected to compress the sector’s margins however, this pressure is likely to be offset by a surge in credit demand, particularly in the UAE and Qatar, and regulatory catalysts such as the new Kuwaiti Mortgage Law. Over the past five years, the sector has demonstrated that fundamental earnings growth has been the primary driver of total returns. The adoption of AI and digital transformation is shifting the banks’ operational models towards operational efficiency, risk management, and personalization of customer engagement. With relatively lower valuations and dividend yields reaching 4%, the sector presents itself as a compelling risk-reward opportunity.
