GCC banks, which are currently highly concentrated in their local countries, can consider expanding to America and Europe by offering Islamic banking services for sustainable long-term growth, Marmore MENA Intelligence, a subsidiary of Kuwait Financial Centre, said in a report.

“The GCC banks have not tested the European and American markets, with only 56 branches. This implies that GCC banks have scope for expansion into such markets,” the consultancy added.

However, the competition in Europe and the US is intense, as the world’s largest banks operate there.

“Given the low levels of penetration of Islamic banking in such regions, GCC banks could do well to position themselves in the lucrative Islamic banking,” Marmore added.

However, the highly localised nature of GCC banks exposes them to challenges linked to their economies. Downturns in oil prices can significantly impact economic performance, which can have a ripple effect on the financial sector.

Their profit margins have also stagnated as the GCC banks have restricted their services to their respective countries or the GCC region.

While a few GCC banks have a strong pan-regional presence, 45% of their branches are situated in the GCC.

Only a few banks have ventured outside their home markets, mainly into Turkey, Egypt and Pakistan.

As of 2022, Turkey (25.5%), Pakistan (13.6%), and Egypt (8.8%) collectively constitute 48% of GCC banks’ presence outside their region.  

(Editing by Brinda Darasha; brinda.darasha@lseg.com)