Overall, 2018 was not kind to Islamic banks in the Gulf Cooperation Council (GCC) area, which expanded at a slower rate than conventional banks for the first time in five years. Asset growth more than halved from 7% in 2017 to 3.2% in 2018, while conventional banks grew marginally from 4% to 4.4%. Currency depreciation in Turkey and economic turmoil in sanction-hit Qatar contributed to a difficult environment.
Nevertheless, S&P notes that the gap was less than one percentage point. It expects GCC Islamic banks to rebound to the same level of growth as conventional banks, at 5%, for 2019 and 2020. While GCC Islamic banks regularly outpaced their non-Islamic peers in the past, subdued economic forecasts for the region coupled with lower projected oil prices have put a damper on asset growth expectations. The recent flare-up in the tension between the US and Iran might push prices higher in the short term, but if the situation boils over, the negative impact of open hostilities could spread to GCC nations.
