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UAE, GCC banks show strong appetite for expansion to Turkey, Egypt and India

Fitch cautioned that the increasing cost of acquiring banks in these countries could weigh on Gulf banks' acquisition plans

Published: Wed 24 Jul 2024, 12:23 PM

Updated: Wed 24 Jul 2024, 8:58 PM

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UAE and other Gulf Cooperation Council (GCC) banks are showing a strong appetite to grow their presence in major regional markets, particularly Turkey, Egypt and India, attracted by improving economic conditions and better growth opportunities than in their domestic markets, Fitch Ratings said.

The global rating agency said that several GCC banks are reportedly looking to acquire banks in Turkey, Egypt and India.

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

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The UAE and other GCC banks want to capitalise on the untapped large population in Turkey, Egypt and India as their banking system assets/GDP ratios are below 100 per cent, compared with over 200 per cent in the largest GCC markets.

The UAE banks have been aggressively expanding to other countries as UAE businesses expand into those markets.

Earlier this month, Abu Dhabi Commercial Bank (ADCB) announced an expansion in Central Asia – a $1.75 trillion economy – by establishing a hub in Kazakhstan for its Shari’ah-compliant corporate banking services.

The lender will support the growth ambitions of companies participating in Central Asia’s rapid economic development.

“Through a renewed presence in Kazakhstan, combined with our network in the UAE and broader Middle East region, ADCB is uniquely positioned to support companies operating along key regional economic corridors,” said Ala’a Eraiqat, Chief Executive Officer of ADCB Group.

Major exposure

Fitch Ratings said GCC banks’ main exposure outside the GCC region is through subsidiaries in Turkey and Egypt, where they had about $150 billion of assets at the end of the first quarter of 2024. “While these markets are the main focus for growth, there is increasing interest in India, particularly from banks from the UAE, which has strong and growing financial and trade links with India,” it said.

GCC banks' main exposure outside the GCC region is through subsidiaries in Turkey and Egypt, where they had about $150 billion of assets at end-1Q24. While these markets are the main focus for growth, there is increasing interest in India, particularly from banks from the UAE, which has strong and growing financial and trade links with India.

Among the UAE banks, Emirates NBD has exposure to Turkey while Abu Dhabi Islamic Bank and First Abu Dhabi Bank have exposure to Egypt.

GCC banks’ appetite to expand in Turkey has increased since the country’s policy shift following last year’s presidential election, which has reduced external financing pressures and macro and financial stability risks and recently led Fitch to upgrade its banking sector outlook.

Interest from GCC banks in Egypt is also gaining momentum.

“We believe this is driven by Egypt’s improved macroeconomic environment, opportunities offered by the authorities’ privatisation programme, and the expansion of some GCC corporates in the country,” it said.

However, Fitch cautioned that the increasing cost of acquiring banks in Turkey, Egypt and India could weigh on GCC banks’ acquisition plans.

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