Gulf Cooperation Council banks show strong appetite for expansion, including in Türkiye: Fitch

By Ovunc Kutlu

ISTANBUL (AA) - Gulf Cooperation Council (GCC) banks are showing a strong appetite to grow their presence in major regional markets, particularly in Türkiye, Egypt and India, Fitch Ratings said Tuesday.

While the banks are attracted by improving economic conditions and better growth opportunities, compared to their domestic markets, they are reportedly looking to acquire banks in Türkiye, Egypt and India, Fitch said in a statement.

"We believe external growth is part of some GCC banks’ strategy to diversify business models and improve profitability," it said. "By deploying capital into high-growth markets, they may be able to compensate for weaker growth in their home markets."

The rating agency said Türkiye, Egypt and India each have much larger populations than the GCC, and greater potential for bank sector growth given their strong real GDP growth prospects and smaller banking systems relative to their economies.

It said their banking system assets/GDP ratios are below 100%, compared with over 200% in the largest GCC markets, and private credit/GDP was only 27% in Egypt, 43% in Türkiye and 60% in India in 2023, and GCC banks’ main exposure outside the GCC region is through subsidiaries in Türkiye and Egypt, where they had about USD150 billion of assets at end-1Q24.

Fitch emphasized that GCC banks’ appetite to expand in Türkiye has increased since the country’s macroeconomic policy shift following last year’s presidential election, which has reduced external financing pressures and macro and financial stability risks.

The rating agency revised the Turkish banking sector outlook on June 25 to “improving” from “neutral” due to reduced external financing pressures and macro and financial stability risks following Türkiye’s adoption of more conventional macroeconomic policies after the election.

Fitch upgraded Türkiye's credit rating to B+ from B on March 8 with a positive outlook.