GCC banks are showing a strong appetite to grow their presence in major regional markets, particularly Turkey, Egypt, and India, driven by improving economic conditions and better growth opportunities in these countries compared to their domestic markets, according to Fitch Ratings.
Several GCC banks are reportedly looking to acquire banks in Turkey, Egypt and India. External growth is part of some GCC banks’ strategy to diversify their business models and improve profitability. By deploying capital into high-growth markets, they aim to compensate for weaker growth in their home markets.
The target markets have much larger populations than the GCC and exhibit potential for growth, given their strong real GDP growth prospects and smaller banking systems relative to their economies.
The banking system assets/GDP ratios in these countries are below 100%, compared with over 200% in the largest GCC markets. Additionally, private credit/GDP was only 27% in Egypt, 43% in Turkey, and 60% in India in 2023.
GCC banks’ main exposure outside the region is through subsidiaries in Turkey and Egypt, where they had about $150 billion of assets at the end of Q1 2024. While these markets remain the main focus for growth, there is increasing interest in India, particularly from banks in the UAE, which has strong and growing financial and trade links with India.
GCC banks’ interest in Egypt is gaining momentum, driven by Egypt’s improved macroeconomic environment and opportunities offered by the country’s privatisation programme.
Fitch recently revised the outlook on its ‘B-‘ operating environment score for Egyptian banks to positive. The rating reflects expectations of improved macroeconomic stability due to Egypt’s large FDI deal with the UAE, an enhanced IMF deal, increased FX rate flexibility and a greater commitment to structural reforms.
The Egyptian banking market has high barriers to entry, but GCC banks may have opportunities to acquire stakes in three banks through the authorities’ privatisation programme, said Fitch.
