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Wednesday, Jul 24, 2024

GCC Banks Outperform Global Peers with Strong Future Outlook

GCC Banks Outperform Global Peers with Strong Future Outlook

The McKinsey & Co. report highlights strong growth for Gulf Cooperation Council (GCC) banks in 2024, driven by high interest margins and fintech innovations, despite global economic challenges. GCC banks outperformed global peers in 2023, maintaining high return on equity levels. Future priorities include digitalization, customer experience enhancements, and strategic mergers and acquisitions.
According to a report by McKinsey & Co., the Gulf Cooperation Council (GCC) banks are set for robust growth in 2024 and beyond, driven by an active oil and gas sector, high interest margins, and fintech innovations.

Despite global economic volatility, GCC banks outperformed their global counterparts in 2023 due to favorable operating environments.

The US Federal Reserve's rapid interest rate hikes have led to higher bank profits but also increased risks, evidenced by the collapse of Silicon Valley Bank and the takeover of Credit Suisse.

Global banking market capitalization fell by $900 billion due to a 10 percent decline in the price-to-book ratio.

The GCC banking sector maintained high return on equity (ROE) and net interest margins, with a ROE consistently exceeding the global average by three to four percentage points from 2022 to 2023.

High hydrocarbon prices and economic growth underpinned this performance.

GCC banks face liquidity management challenges, highlighted by higher financing growth rates compared to deposit rates.

Innovations like open banking and advanced AI technologies are reshaping the industry's landscape.

McKinsey's report recommends GCC banks focus on digitalization, enhancing customer experiences, and maintaining environmental and governance initiatives to navigate future uncertainties effectively.

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