Kuwait's banks expected to reap rewards from a projected credit expansion of 5-6% in the year 2025
The Kuwaiti banking sector is poised for growth in 2025, according to Moody's Investors Service, which predicts a credit growth of 5-6%. This optimistic outlook is supported by the sector's continued strength, with total assets reaching an impressive KD 92 billion ($297 billion) as of December 31, 2024.
Key factors driving this growth include a strong asset base, a diversified economy, government support, prudent risk management, and a sound operational and regulatory framework. The Kuwaiti banking sector's robust asset base reflects its resilience and substantial financial resources, while the country's efforts to diversify its economy could create new opportunities for investment and lending.
The government's initiatives to stimulate economic growth and maintain stability are likely to positively impact the banking sector. Kuwaiti banks are known for their prudent risk management practices, which help maintain asset quality and stability. The sector operates within a sound operational and regulatory framework, providing a solid foundation for growth.
One of the significant drivers of the sector's growth between 2020 and 2024 was the local private sector claims, which reached KD 47 billion, making up 52% of total assets. Local private sector deposits also constitute 43% of total liabilities and shareholders' equity in the Kuwaiti banking sector.
The loan-to-deposit ratio in the Kuwaiti banking sector has risen above 90%, as credit growth has surpassed deposit growth. However, the loan-to-GDP ratio has dropped from 114% to 95% due to strong nominal GDP growth outpacing credit growth.
Foreign assets in the Kuwaiti banking sector have surged from KD 16 billion in 2020 to 28 billion in 2024, growing at 14% annually. This growth in foreign assets, combined with foreign liabilities accounting for only 14% of total liabilities, reinforces the sector's financial resilience.
Moody's also praised the robust support environment provided by the Kuwaiti government. The government's support is expected to continue, with plans for increased government spending on major infrastructure projects such as Mubarak Al-Kabeer Port, Sabah Al-Ahmad City, and the new airport terminal.
A draft mortgage law is underway in Kuwait to boost affordable housing access and deepen financial reforms. The law, if passed, could further stimulate growth in the real estate and construction sectors, which currently account for 26% of the resident loan portfolio in Kuwait.
The Central Bank of Kuwait uses the CAMEL-BCOM7 rating system for supervising the Kuwaiti banking sector. The bank continues to rely heavily on stable, low-cost domestic deposits, with no new information about the loan-to-GDP ratio, Moody's projections, or the Central Bank of Kuwait's CAMEL-BCOM7 rating system provided in this paragraph.
In terms of retail banking, total plastic card transactions in Q4 2024 reached KD 11.78 billion, with KD 11.04 billion spent domestically and KD 0.74 billion spent abroad.
Kuwait's Decree-Law No. 60 of 2025 sets a public debt ceiling of KD 30 billion and authorises long-term financial instruments. This move is expected to provide further stability and support for the Kuwaiti banking sector.
In conclusion, the Kuwaiti banking sector presents a stable and promising outlook for 2025, driven by a strong asset base, a diversified economy, government support, prudent risk management, and a sound operational and regulatory framework. The sector's growth is expected to be spurred by continued government spending on major infrastructure projects and the potential passage of a draft mortgage law.
Investors looking at business opportunities in personal-finance and investing in 2025 might find the Kuwaiti banking sector attractive, given its projected credit growth of 5-6%, as predicted by Moody's Investors Service. The growth is driven by a strong asset base, prudent risk management, and a sound operational and regulatory framework, which provide a solid foundation for potential investments.
