MENA Banks: MENA Conference Takeaways

Research evidence excerpt

MENA Banks: MENA Conference Takeaways

UpdateMtheme with banks highlighting AI, digital, process re-engineering and overall cost discipline

as the drivers.

Asset quality trends are benign, but there is less scope for further improvement. There

appears to be a preference for strong NPL coverage (at least 150%) over release of further

provisions. The need to take overlays appears less pressing vs. region as Saudi is relatively

insulated vs. region.

Saudi banks are generally well positioned on capital, however there is a focus on

efficiency - risk adjusted returns, SRT (synthetic risk transfer), increasing balance sheet

leverage, and a preference for profitability over balance sheet growth. For some, despite

strong capital buffers, capital optimisation efforts were temporarily paused, in light of the

geopolitics. Banks signalled either steady dividends or pay-out policy continuity.

Government spending remains supportive: Participants pointed to the rise in

government expenditure in 1Q26 by 20% YoY as evidence of increased fiscal support to

economic activities, including on defence.

Investment priorities evolving: While corporates indicated there are no immediate plans

to announce major new Capex projects in response to the implications of the closure of

the Strait of Hormuz, discussions are ongoing within the Kingdom on strengthening

energy security and maritime resilience. In our view, these could translate over time into

higher investment in western ports, as well as oil storage and transfer infrastructure and

should help underpin loan growth.

UAE - a strong starting point; government's strategic investment plans to remain in

place

UAE banks' NIM outlook appears more negative vs. Saudi. Mgmt. signalled a liquidity