Corporate and Investment Banking in the GCC: Accelerating Growth and Challenges Ahead
Times are good for corporate and investment banking (CIB) across Gulf Cooperation Council (GCC) countries. From 2021 to 2024, CIB revenue increased by about 14 percent annually—more than double the region’s historical CAGR of about 6 percent—to push total revenue to between $55 billion and $65 billion. Banks across the GCC expect that CIB revenue will increase to $90 billion to $100 billion by 2030, as the high growth rates that have pushed CIB’s share of total banking revenue in the region to more than 50 percent are expected to persist.
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Exhibit 1 Image description Two charts compare the 2023-2024 and 2030 corporate and investment banking revenue of
the Gulf Cooperation Council in four segments: transaction banking, lending, sales and trading, and primary
market. In 2023-2024, revenue is about $55 billion to $65 billion; the 2030 forecast revenue is about $90 billion
to $100 billion. In both periods, transaction banking makes up about 40% to 60% of revenue, lending makes up
about 40% to 45%, and sales and trading and primary market make up the remainder. Source: McKinsey analysis
based on market expectations among Gulf Cooperation Council corporate and investment banks End image description
Yet even as the broad environment remains positive, CIB faces increasingly complicated challenges in the GCC, especially from the potential impact of factors such as oil-price uncertainty, geopolitical dynamics, corporate tax increases, and low interest rates. This article identifies five focus areas for banks to remain at the forefront: fueling the CIB engine with transaction banking and foreign exchange, driving capital utilization, expanding offerings and expertise from traditional finance to capital markets and trading, prudently growing and diversifying lending, and managing costs effectively by increasing operational productivity and implementing new technologies.
Understanding current tailwinds and headwinds
While challenges lie ahead for the CIB industry in the GCC, it is still benefiting from significant tailwinds (Exhibit 2). For example, non-oil GDP is growing, propelled partly by long-term government programs. As regional economies diversify and the private sector expands, there has been a surge in small and medium-size enterprises (SMEs) in need of segment-specific solutions—for example, cash management product bundles. Meanwhile, multinational corporations are increasing their footprints, prompting a need for more-sophisticated products to support their operations. The growth of foreign direct investment in GCC countries (approximately 8 percent per year from 2014 to 2023) could further stimulate cross-border payments.
However, at a macro level, mid- to longer-term volatility in oil prices, geopolitical dynamics, and corporate tax increases are all potential headwinds. More specifically for the banking sector, CIBs must overcome funding shortages with record-high loan-to-deposit ratios—nearing or surpassing 100 percent in half of all GCC countries—which create potential liquidity constraints. In addition, lower interest rates, with more cuts expected this year, are putting pressure on returns, given that approximately 85 percent of GCC banks’ income is based on interest.
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Exhibit 2 Image description A table depicts tailwinds and headwinds of two aspects of the Gulf Cooperation Council
(GCC) banking: macroeconomic shifts and corporate and investment banking intrinsics. The macroeconomic tailwinds
are a shift toward non-oil GDP growth, growth of foreign investments, evolving corporate structure, and increased
presence of multinational corporations in the GCC. Headwinds are oil price uncertainty, geopolitical dynamics, and
corporate tax increase. For corporate and investment banking intrinsics, the tailwind is robust momentum, and the
headwinds are record-high loan-to-deposit ratio and pressure on returns. End image description
Five priorities to maintain momentum
1. Fuel the CIB engine with transaction banking and foreign exchange
In the GCC region, transaction banking (TB) accounts for some $25 billion to $35 billion in total CIB revenue—between 40 percent and 60 percent of the total—and is forecast to grow by approximately 7 percent annually. While these are in line with global trends, deeper digging reveals significant differences with the rest of the world (Exhibit 3). In the GCC, about 60 percent of TB revenue relies on income from balances on banking accounts, while the global average is about 45 percent. Trade finance in the GCC accounts for 14 percent of revenue, compared with 8 percent globally. This can be attributed to the proactive strategies of several leading GCC banks, which have been establishing regional trade corridors for their clients to move beyond local confines. However, macroeconomic developments have introduced a degree of uncertainty around trade flows and associated TB income. Payments make up about 13 percent of revenue compared with 15 to 30 percent in other regions, largely because of the GCC practice of offering payments as add-ons to lending or deposits to increase market share. Also, card usage is minimal: just 2 percent of revenue, well below global averages.
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Exhibit 3 Image description A segmented bar chart compares the share by product of Gulf Cooperation Council (GCC)
banking revenues with other countries and regions for 2023-2024. Trade finance and accounts shares are generally
higher in the GCC, at 14% and 61%, respectively. In other regions, trade finance is 10% at most, and accounts are
between 45% and 49%. Other products, which are liquidity management, collections, payments, merchant acquiring, and
cards, have relatively small revenue shares in the GCC, ranging from 1% to 13%. Footnote 1: Revenues include net
interest income and commissions. Footnote 2: Accounts are estimated based on wholesale deposits and the average
deposit margin. Footnote 3: Figures for Kuwait, Qatar, and the United Arab Emirates are extrapolated based on Saudi
Arabia for cards, merchant acquiring, payments, and collections. Source: McKinsey Global Payments Map End image
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