GCC banks show robust interest in global expansion, Fitch says

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Banks in the GCC region are exhibiting a strong appetite to grow their presence in major regional markets, particularly Turkiye, Egypt, and India, Fitch Ratings said on Tuesday, citing improved economic conditions and growth opportunities in target markets.

Several Gulf banks are reportedly considering acquisitions in Turkiye, Egypt, and India to diversify business models and enhance profitability as part of a broader external growth strategy.

“By deploying capital into high-growth markets, GCC banks may be able to compensate for weaker growth in their home markets,” Fitch said in a report.

The report noted that the target markets hold greater potential for bank sector growth, given their strong real GDP growth prospects and smaller banking systems relative to their economies.

GCC banks’ main exposure outside the region is through subsidiaries in Turkiye and Egypt, which held around $150bn in assets in the first quarter of 2024. Similarly, there is increasing interest in India, particularly from banks in the UAE, which has strong and growing financial and trade links with the South Asian nation.

GCC banks’ growth ambitions

 Earlier in July, First Abu Dhabi Bank (FAB) said it is not considering buying a 51 per cent stake in Yes Bank after numerous media reports suggested that the Abu Dhabi lender was one of the potential buyers weighing a bid for a $5bn majority stake in the Indian lender.

The UAE’s biggest bank by assets was linked to a potential acquisition of Turkish conglomerate Koc Group’s 61.2 per cent stake in Istanbul-based lender Yapi Ve Kredi Bankasi (Yapi Kredi). However, a deal between FAB and Yapi Kredi was hampered by disagreements over price.

FAB has made several attempts to acquire a lender outside the region in search of growth, including Egypt’s biggest investment bank, EFG Holding.

Dubai Islamic Bank, the UAE’s biggest Shariah-compliant lender by assets, acquired a 20 per cent stake in Turkey’s TOM Group of Companies in September 2023.

Similarly, Dubai’s largest bank, Emirates NBD, acquired 99.85 per cent of Denizbank’s shares for $2.76bn in 2019.

Meanwhile, though the Egyptian banking market has high barriers to entry, GCC banks may have opportunities to acquire stakes in three banks through the North African country’s privatisation programme.

McKinsey said, in a report in February, that mergers and acquisitions (M&A) remain a high priority for financial services players heading into the mid-2020s. Most financial services executives across Europe, the Middle East, and Africa (EMEA) expect M&A to remain a high priority for banks to maintain or gain momentum.

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