Gulf Cooperation Council (GCC) banks are showing a strong appetite to expand their presence in major regional markets, particularly in Türkiye, Egypt and India, Fitch Ratings said Tuesday.
While the banks are attracted by improving economic conditions and better growth opportunities compared to their domestic markets, they are reportedly looking to acquire banks in Türkiye, Egypt and India, Fitch said in a statement.
"We believe external growth is part of some GCC banks’ strategy to diversify business models and improve profitability," it said. "By deploying capital into high-growth markets, they may be able to compensate for weaker growth in their home markets."
The rating agency said Türkiye, Egypt and India each have much larger populations than the GCC and greater potential for bank sector growth given their strong real gross domestic product (GDP) growth prospects and smaller banking systems relative to their economies.
The GCC is a political and economic alliance that includes Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman and Bahrain.
It said their banking system assets-GDP ratios are below 100%, compared with over 200% in the largest GCC markets, and private credit-GDP was only 27% in Egypt, 43% in Türkiye and 60% in India in 2023, and GCC banks’ main exposure outside the GCC region is through subsidiaries in Türkiye and Egypt, where they had about $150 billion of assets at the end of the first quarter this year.
While these markets are the main focus for growth, there is increasing interest in India, particularly from banks from the UAE, which has strong and growing financial and trade links with India, according to the agency.
Fitch emphasized that GCC banks’ appetite to expand in Türkiye has increased since the country’s macroeconomic policy shift following last year’s presidential election, which has reduced external financing pressures and macro and financial stability risks.
The rating agency revised the Turkish banking sector outlook on June 25 to "improving” from "neutral” due to reduced external financing pressures and macro and financial stability risks following Türkiye’s adoption of more conventional macroeconomic policies after the election.
"Increased investor confidence in Türkiye’s policy framework has led to an improvement in the Central Bank of the Republic of Turkiye’s (CBRT) foreign-exchange (FX) reserves position, lower dollarisation and better access to external financing for banks," Fitch said at the time.
On Tuesday, it also said it forecasted Turkish inflation to decrease to an average of 23% in 2025 from 65% in 2023.
Amid a shift in the policy, the Turkish central bank delivered aggressive monetary tightening to cool growth in price gains and gradually lifted its benchmark policy rate from 8.5% to 50% since June last year.
Fitch upgraded Türkiye's credit rating to "B+" from "B" on March 8 with a positive outlook.
