EFG Hermes has reported that Kuwaiti banks rank among the strongest performers in the Gulf Cooperation Council since the beginning of 2025, second only to banks in the United Arab Emirates, supported by long-awaited government reforms and stronger-than-expected loan growth.
In its latest report, the firm noted that total credit growth reached 11% year-on-year during the first nine months of 2025, significantly exceeding Hermes’ earlier forecast of 7% and accelerating from 6% recorded in 2024, reports A-Rai daily.
Hermes attributed this performance primarily to the expansion of international operations at National Bank of Kuwait and Kuwait Finance House, alongside a notable recovery in domestic credit growth.
Domestic lending rose by around 7% year-on-year in 2025, compared with low single-digit growth in 2024, driven largely by the corporate sector.
Looking ahead, Hermes expects loan growth to stabilize at around 10% in 2026, in tandem with a marked improvement in government capital spending as implementation of the state budget accelerates. The government has begun reviving stalled mega-projects with an estimated value of KD40 billion, which is expected to support credit demand across multiple sectors.
Mortgage lending and housing projects are seen as key drivers of medium-term growth, although their impact will depend on the Central Bank of Kuwait issuing a comprehensive mortgage regulatory framework, anticipated in the first half of 2026.
Under current assumptions, Hermes estimates mortgages will contribute approximately one percentage point to loan growth in 2026 and 2027. Faster expansion in housing supply could significantly enhance this outlook.
On capital adequacy, Hermes highlighted structural differences between Kuwait and other GCC markets. Unlike Saudi Arabia and the UAE, the Central Bank of Kuwait does not impose countercyclical capital buffers. In addition, interim profits are not included in capital adequacy calculations during the year, placing temporary pressure on ratios in the first three quarters before recovery at year-end.
Profitability prospects remain solid. Hermes forecasts a 10% increase in both pre-provision income and net profit for the Kuwaiti banking sector, supported by total revenue growth of 7%, outpacing operating expense growth of 5%.
