Several Kuwaiti banks have launched a new wave of loan rate cuts, offering customers financing at levels not seen in years. Some institutions are now promoting rates as low as 5.75%, compared with the group average of 6% just weeks ago — and well below the 7% benchmark that prevailed until July.

The move has sparked questions about how banks can sustain profit margins as competition intensifies, especially with the Central Bank’s discount rate still fixed at 4%. Yet insiders suggest the strategy is less about immediate returns and more about securing long-term credit growth.

For now, the short-term impact on earnings is expected to be limited. Lower rates may even support banks’ revenues by reviving demand in a credit market slowed by last year’s rapid interest rate hikes, which curbed borrowing appetite among both individuals and businesses.

Analysts also point to global factors. With the US Federal Reserve widely expected to begin cutting rates later this year — possibly with a one-time 0.5% reduction in September — Kuwaiti banks appear to be positioning themselves early to capture a coming surge in loan demand, reports Al-Rai daily.

According to one observer, “Banks don’t want to wait until the Fed moves. If they stick to high rates now, they risk losing both new clients and existing ones to more aggressive competitors.”

The race to offer cheaper loans is also shaped by deeper structural strengths. Banks with large deposit bases, especially those backed by strong government accounts, have more flexibility to fund low-interest lending without eroding margins.

Others rely on their ability to tap international markets. Institutions with broad global networks can access cheaper external financing through syndicated loans, bonds, or sukuk, giving them extra room to compete locally.

The battle for customers is also underpinned by years of accumulated liquidity. With limited domestic demand in recent years, many Kuwaiti banks deployed excess funds abroad, giving them buffers to absorb reduced returns at home.

High precautionary provisions built up over the past decade further cushion the impact. Recoveries from these reserves help offset the cost of shrinking margins while maintaining stability against potential non-performing loans.

Ultimately, industry watchers say the strategy reflects a bigger play: holding market share now to secure long-term interest income when the global monetary cycle shifts decisively toward lower rates. In Kuwait’s banking market, the competition for credit has clearly entered a new phase.