GCC banks could see a 25% surge in losses in 2026

GCC banks are bracing for a possible 25% y-o-y rise in loan loss provisions in the next two years to hit USD 11.6 bn in 2027 as regional conflict widens their risk exposure to defaults, according to a report from S&P’s Visible Alpha seen by EnterpriseAM.

The forecast is primarily driven by UAE banks’ exposure to the real estate debt, with many real estate issuances falling into distress earlier in March before some corrected over widening yield spreads, as we previously reported. The report also pointed to risks of declining rents, which could affect loan repayments.

Who’s most exposed? In the UAE it’s Dubai Islamic Bank and the First Abu Dhabi Bank that have the biggest risk exposure to real estate, with almost a quarter of each of their portfolios going to developers, the report says. Midsized developers and contractors “are more vulnerable to payment delays and rising funding and construction costs,” fueling a potential rise in nonperforming loans.

Background: GCC banks are expected to slash dividends by up to 50% this year to protect

their liquidity positions as they navigate the fallout of the regional conflict.