RIYADH: Gulf Cooperation Council banks are projected to issue over $30 billion in US dollar-denominated debt in 2025, following a record $42 billion in 2024, Fitch Ratings said in a new report.
The surge in debt issuance is set to be driven by nearly $23 billion in maturing debt, lower US dollar interest rates, and strong regional credit demand, particularly in Saudi Arabia and the UAE.
This comes as GCC banks accounted for 18 percent of total US dollar debt issuance by emerging-market banks in 2024, with this figure rising to 36 percent if Chinese banks are excluded. Favorable global financing conditions, supported by high oil prices projected to remain around $70 per barrel in 2025, are anticipated to continue bolstering investor confidence in the region.
“We expect Saudi banks’ US dollar debt issuance to continue representing a high proportion of overall GCC issuance given the country’s strong credit growth outlook, especially in the corporate segment, and the banks’ increased use of external funding due to high competition for liquidity locally,” stated Fitch Ratings.
Last year, GCC banks broke their previous debt issuance record of $25.6 billion set in 2020. This increase was largely attributed to strong credit growth in Saudi Arabia, banks’ efforts to diversify funding sources, and high debt maturities. The issuance of certificates of deposits alone totaled $8.6 billion, benefiting from investor optimism and the region’s economic stability, the report noted.
Saudi and UAE banks were the leading issuers, each accounting for around a third of total GCC debt issuance. Saudi banks, in particular, have become active in international debt markets since 2020, using external funding to support aggressive growth strategies, diversify funding bases, and meet rising foreign currency demands.
Short-term CDs were a key instrument in GCC banks’ debt strategies in 2024, accounting for about 21 percent of total debt issuance. Key financial hubs such as New York, London, Hong Kong, and Singapore facilitated much of this activity, broadening investor bases and enhancing liquidity options.
The report noted that Islamic finance stayed strong, with sukuk issuance accounting for nearly half of the total 2024 issuance, excluding CDs. The growth in sukuk highlights its appeal to shariah-compliant investors and competitive pricing that makes it an attractive funding instrument for regional banks.
Fitch expects Saudi banks to maintain a dominant share of GCC debt issuance in 2025, driven by strong credit growth in the corporate sector and increasing competition for local liquidity.
In 2025, GCC banks will face substantial debt maturities, with Qatari banks expected to account for one-third of the $23 billion due. Saudi and UAE banks will each represent about a quarter of the maturing debt.
Despite global economic uncertainties, Fitch stated that GCC banks are expected to leverage their solid credit ratings and favorable economic conditions to secure advantageous financing terms.
Sukuk issuance is expected to grow further as banks tap into the expanding pool of Shariah-compliant investors. Fitch said the continued use of short-term instruments like CDs will provide banks with greater flexibility in managing funding needs and expanding their global investor base.
Additionally, GCC banks are expected to issue $2.2 billion in additional Tier 1 instruments with first call dates in 2025, followed by $3.1 billion in 2026. This will further support debt issuance, as most GCC bank AT1s are likely to be called due to favorable financing conditions.
AT1 issuance reached $5 billion in 2024, up from $1.7 billion in 2023, marking the highest level since 2021. This surge was driven mainly by Saudi banks.
As GCC banks continue to play a key role in regional economic growth, their strategic debt issuance and diversified funding solutions are expected to drive further financial stability and market confidence in 2025.
