Safest Banks In The Middle East 2018

Middle East banks are generally strong, but will need to grow their books of quality loans to improve profitability.

Our 2018 ranking of the top 50 safest Middle East banks is largely comprised of entities domiciled in the Gulf Cooperation Council (GCC) countries. These economies are dealing with the outlook for lower economic growth, combined with the strain from low oil prices in recent years. Consequently, the banking sector is faced with the challenge to grow loan portfolios and maintain profitability, while managing potential asset-quality deterioration and rising credit costs.

Many of the banks included in our rankings dominate their respective markets, and there is a high concentration of banking system assets. The three largest GCC banks account for approximately 65% of system assets, while in the UAE alone, the five largest banks have captured 60% of assets. UAE banks are well represented in our rankings, with six banks in the top 15 slots, and 12 names in the top 50. Generally, the UAE banks are well capitalized (above the central bank requirement) and exhibit sustained profitability but weakening asset quality.

Banks in Saudi Arabia are benefiting from an economy that has been given a lift from government stimulus, which may result in positive growth in 2018. Many Saudi bank balance sheets are asset sensitive, with loans carrying variable rates. That will boost net interest income as interest rates rise. Saudi Arabia, Bahrain and the UAE mirror US monetary policy; they have followed the Federal Reserve’s lead and raised rates. 

The economies of GCC members UAE, Kuwait and Saudi Arabia are comparatively stronger than Bahrain, Oman and Qatar. Qatar is contending with added financial stress from an economic boycott by Saudi Arabia, the UAE, Egypt and Bahrain since June 2017 that is causing significant disruption. This is weighing on the Qatari banks and has resulted in weaker profitability, deteriorating asset quality and liquidity pressure from deposit outflows. The Qatari government has countered the outflows by injecting deposits in the system, including $40 billion during 2017. 

The impact of lower oil prices on the banking sector is considerable and has pressured bank liquidity, as a drop in oil-export revenue prompted governments to draw on their accounts to maintain stimulus spending. By some estimates, GCC governments account for 20% to 40% of deposits in GCC banks and there is limited wholesale funding, with most bank liquidity coming from customer deposits. 

With the adoption of the IFRS 9 financial reporting standard in early 2018, banks must focus on originating high-quality loans or face higher costs when taking on added risk. While near-term loan growth will be challenging, long-term infrastructure projects will involve higher capital spending and present considerable opportunities for loan growth in the sector. These programs include: UAE Expo 2020, World Cup Qatar 2022, the Saudi National Transformation Program and Kuwait 2035. 

While bank mergers are infrequent, there are some notable transactions—especially the merger of Saudi British Bank and Alawwal Bank, which will create the third-largest Saudi bank. In the UAE, a proposed three-way merger of Abu Dhabi Commercial Bank with Union National Bank and Al Hilal Bank would create the second-largest UAE bank, with $110 billion in assets.

The catalyst for many of the changes in the composition of our rankings was the Fitch downgrade of the government of Qatar and the subsequent downgrades of all Qatari banks—with the exception of Qatar National Bank, which held steady in 3rd place. Fitch and S&P also downgraded Qatar’s Doha Bank, which fell 18 places, to 33rd. These downgrades gave a relative lift to other banks: Kuwait’s Boubyan Bank rose to 18th place, and a range of Saudi banks rose three places.

The Middle East’s Top 50 Safest Banks
Rank Company Name Country Fitch Moody’s S&P Total Score Assets ($ Mil.) Statement Date
1 First Abu Dhabi Bank UAE AA— Aa3 AA— 21 185,156 31-Dec-2017
2 National Bank of Kuwait Kuwait AA— Aa3 A+ 20 86,279 31-Dec-2017
3 Qatar National Bank Qatar A+ Aa3 A 18 222,824 31-Dec-2017
4 Abu Dhabi Commercial Bank UAE A+ A1 A 17 72,159 31-Dec-2017
5 Kuwait Finance House Kuwait A+ A1 NR 17 57,524 31-Dec-2017
6 Union National Bank UAE A+ A1 NR 17 29,277 30-Jun-2017
7 Al Hilal Bank PJSC UAE A+ A1 NR 17 12,195 31-Dec-2017
8 Abu Dhabi Islamic Bank UAE A+ A2 NR 15.5 33,568 31-Dec-2017
9 Al Ahli Bank of Kuwait Kuwait A+ A2 NR 15.5 14,455 31-Dec-2017
10 Ahli United Bank Kuwait A+ A2 NR 15.5 12,148 31-Dec-2017
11 Qatar Islamic Bank Qatar A A1 A— 15 41,312 31-Dec-2017
12 Bank Hapoalim Israel A A2 A— 14 131,071 31-Dec-2017
13 Bank Leumi Le-Israel Israel A A2 A— 14 130,037 31-Dec-2017
14 Emirates NBD UAE A+ A3 NR 14 128,080 31-Dec-2017
15 Gulf Bank Kuwait A+ A3 A— 14 18,835 31-Dec-2017
16 Commercial Bank of Kuwait Kuwait A+ A3 NR 14 14,564 31-Dec-2017
17 Barwa Bank Qatar A A2 NR 14 13,362 31-Dec-2017
18 Boubyan Bank Kuwait A+ A3 NR 14 13,158 31-Dec-2017
19 Qatar International Islamic Bank Qatar A A2 NR 14 12,807 31-Dec-2017
20 Ahli Bank Qatar A A2 NR 14 10,957 31-Dec-2017
21 Inernational Bank of Qatar Qatar A A2 NR 14 9,090 31-Dec-2016
22 The National Commercial Bank Saudi Arabia A— A1 BBB+ 13 118,364 31-Dec-2017
23 Al Rajhi Bank Saudi Arabia A— A1 BBB+ 13 91,498 31-Dec-2017
24 SAMBA Financial Group Saudi Arabia A— A1 BBB+ 13 60,696 31-Dec-207
25 Banque Saudi Fransi Saudi Arabia A— A1 BBB+ 13 51,448 31-Dec-2017
26 Saudi British Bank Saudi Arabia A— A1 BBB+ 13 50,031 31-Dec-2017
27 Burgan Bank Kuwait A+ A3 BBB+ 13 24,574 31-Dec-2017
28 Dubai Islamic Bank PJSC UAE A A3 NR 12.5 56,457 31-Dec-2017
29 The Commercial Bank Qatar A A3 NR 12.5 38,035 31-Dec-2017
30 Al Khalij Commercial Bank Qatar A A3 NR 12.5 15,902 31-Dec-2017
31 Riyard Bank Saudi Arabia A— A2 BBB+ 12 57,675 31-Dec-2017
32 Mashreqbank PSC UAE A Baa1 NR 12 34,088 31-Dec-2017
33 Doha Bank Qatar A A3 BBB+ 12 25,686 31-Dec-2017
34 Arab National Bank Saudi Arabia BBB+ A2 BBB+ 11 45,787 31-Dec-2017
35 Warba Bank Kuwait A+ Baa2 NR 11 5,876 31-Dec-2017
36 Sharjah Islamic Bank UAE BBB+ A3 NR 10 10,426 31-Dec-2017
37 Alawwal Bank Saudi Arabia BBB+ A3 NR 9.5 26,632 31-Dec-2017
38 Commercial Bank of Dubai UAE A— Baa1 NR 9.5 19,173 31-Dec-2017
39 Saudi Investment Bank Saudi Arabia BBB+ A3 BBB 9 25,012 31-Dec-2017
40 Israel Discount Bank Israel NR Baa1 BBB+ 8 63,722 31-Dec-2017
41 Gulf International Bank Bahrain BBB- A3 NR 8 25,471 31-Dec-2017
42 Bank Aljazira Saudi Arabia BBB+ Baa1 NR 8 18,210 31-Dec-2017
43 RAKBank  UAE BBB+ Baa1 NR 8 13,216 31-Dec-2017
44 National Bank of Fujairah UAE NR Baa1 BBB+ 8 9,980 31-Dec-2017
45 Ahli United Bank BSC Bahrain BBB— NR BBB 3.5 33,242 31-Dec-2017
46 HSBC Bank Oman SAOG Oman BBB Baa3 NR 3.5 6,070 31-Dec-2017
47 Bank ABC Bahrain BBB— NR BBB— 2 29,499 31-Dec-2017
48 Bank Muscat SAOG Oman BBB— Baa3 BB 0 28,997 31-Dec-2017
49 Bank Dohfar Oman BB+ Baa3 NR 1 11,045 31-Dec-2017
50 National Bank of Oman Oman BB+ Baa3 NR —1 9,028 31-Dec-2017
Asset figures from Fitch, Moody’s, and company reports. Ratings valid as of Aug. 17, 2018.