Tighter local monetary policy conditions and lower economic growth will lead to a decline in lending growth for Gulf Cooperation Council (GCC) banks. We expect banks’ asset quality indicators to deteriorate only slightly because of slowing growth and higher interest rates. Although banks have absorbed the impact of the pandemic, they also continued to build provisions and write off nonperforming loans to make space for new ones. Profitability has recovered to pre-pandemic levels in most GCC countries thanks to higher interest rates and stable cost of risk. Meanwhile, banking sector efficiency remains strong, but inflation will increase operating costs.