MENA Banks The repricing ladder, not the franchise, decides who earns from higher interest rates

Equity Research 13 October 2026 | 8:01AM GST

The repricing ladder, not the franchise, decides who earns from higher interest rates

Fed path transmission via dollar pegs; curve shape favourable for GCC banks Kazim Andac | GCC rate expectations have repriced sharply higher since Jan-26, with average 2027 Goldman Sachs International implied rates up c.160bps through Oct-26 — mainly a Fed story given regional pegs. Ashwath P T, CFA Flattening (10Y/5Y vs. 2Y compressing) is near-ideal for GCC banks: floating books | Goldman Sachs International anchor revenue to a high front end while a relatively smaller rise in the long end limits FVOCI/AFS marks. GCC banks are asset-sensitive by construction, though capped by Ibrahim Elaiwat | Saudi mortgage duration and Kuwaiti retail caps. Unlike 2022–23, UAE upside is Goldman Sachs International largely embedded, leaving unpriced optionality in Saudi Arabia, Qatar, and possibly Gokul Vinayak L Kuwait. | Goldman Sachs India SPL

Mrinal Harsh | The four systems don’t overlap; dispersion is structural, not cyclical Goldman Sachs India SPL The impact of higher-for-longer rates will vary; gearing depends on asset length, deposit pricing, and regulatory pass-through. Qatar screens strongest with embedded gearing. The UAE follows, though conditional on low LDRs and resilient CASA. Saudi Arabia faces basis risk due to long durations and credit growth, while Kuwait’s asset yields are capped but deposit repricing is not.

Leaders reflect conversion; laggards cluster in Saudi Arabia The system with the most medium-term credit growth has the least gearing, so leadership depends on conversion: Qatar delivers c.+10% (CBQ) and c.+5% (QNB) of net income per 100bps vs. the UAE’s c.+3%-6%. ENBD screens well for sensitivity, QIB for purity, CBQ for convexity, QNB for NII dependence, and ADIB/ADCB for Abu Dhabi’s CASA mix. In Saudi Arabia, ANB faces reversing maturity-mismatch carry, SNB timing effects, BSF a discretionary derivative position, and Rajhi valuation risk — leaving Alinma, Riyad and SAB with the cleanest exposures. NBK is a high-quality franchise, but other overhangs cast uncertainty over rate benefits.

Volume drives NII to 2028; top-line rankings don’t reach the bottom line Margin is a net drag overall in our base case (rate cuts by 2028): Saudi Arabia and the UAE are volume-led, Qatar is liability-sensitive due to a term-heavy deposit base, and Kuwait faces compression. Rajhi leads with expanding margins, followed by ADIB, Alinma, and ADCB, while DIB lags. However, taxes and NPL ratios in Kuwait and Qatar impact earnings. Our Buys include FAB, ADCB, SAB, Riyad, and QNB; ENBD (Neutral) screens well on rates but faces other overhangs.

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A favourable repricing: Higher rates and flatter curve 7

Structural gearing: Mapping rate responsiveness across the Gulf 12

Where the rate regime rewards balance sheet construction over franchise reputation 17

NII outlook: Volume over spread - The margin cycle is a funding-structure story 23