GCC Banks Outperform their International Peers and are Expected to Have Extraordinary Years in the Future

GCC Banks Outperform their International Peers and are Expected to Have Extraordinary Years in the Future

According to a recent analysis, the banking sector in the Gulf Cooperation Council(GCC) region is expected to increase in 2024 and beyond because to factors like a strong oil and gas sector, high interest margins, and fintech innovation.

The region’s financial institutions outperformed their international counterparts in 2023 due to an exceptional operating environment, according to analysis by global management consulting firm McKinsey & Co. Despite global macroeconomic volatility, the sector is expected to perform strongly this year.

Following COVID-19, global banking is confronted with formidable obstacles, such as escalating costs and swift monetary contraction.

Rapid rate increases by the US Federal Reserve have improved bank earnings but also elevated dangers from unrealized losses, as seen by Silicon Valley Bank’s failure and Credit Suisse’s takeover.

Global prices may be further pressured by ongoing high US interest rates and instability in the Middle East. The price-to-book ratio dropped by 10% as a result of these problems, resulting in a $900 billion fall in the worldwide banking market capitalization.

The GCC banking industry was praised by the McKinsey & Co. report, which stated that it “boasts an exceptionally high return on equity and some of the largest multiples worldwide.”

“Over the past ten years, the regional financial sector has yielded healthy returns to shareholders, outperforming the global average,” the research continued.

According to McKinsey & Co., the total shareholder return index, which monitors the dividend-adjusted share prices of more than 80 financial institutions in the GCC, has continuously demonstrated stronger growth patterns than worldwide benchmarks between 2010 and 2024.

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