But this profit growth highlights the problems facing GCC institutions. In the current economic climate, for management not to grow earnings and assets at a healthy pace would seem like a derogation of duty. The question is how to take advantage of current conditions to lock in more secure, long-term profitability. ‘The challenge is to sustain growth,’ says Al-Ghurair. ‘Some banks have indicated that it is a one-time gain and are preparing the audience not to expect it every year.’

The larger of the region’s banks are looking to build future growth through operations abroad. ‘All banks are examining expansion strategies,’ says Al-Ghurair. ‘Some will grow through organic growth, others through acquisitions.’

Expansion plans are generally limited to the Arab world. In contrast to the mood several years ago – ironically given that economic circumstances in the region were at the time far more straitened – few regional banks profess international ambitions.

Within the Gulf, however, the conditions for expansion – whether by organic or inorganic means – are severely constrained. Institutional and national pride are major obstacles. Banks’ boards are unwilling to cede control, while central banks are for the most part almost equally opposed to seeing a foreign institution take over a local one and are stingy with their licences – arguably with some justification in the region’s more overbanked markets.

At the same time, and compounding the problem, the stipulations of international trade agreements are forcing GCC governments to open up to international institutions, making the case for regional tie-ups even more urgent. ‘Size is important,’ says the head of one of the smaller GCC banks. ‘And there will be no room for banks of our size if the market opens up more in the future. But the problem is a lack of political will and vision by major shareholders, who look at their stakes as their inheritance, an annuity. My advice would be for our bank to allow itself to be acquired, but the suggestion is so bad you can’t even talk about it – it’s like talking about suicide.’

The most recent exception, the July acquisition by Commercial Bank of Qatar (CBQ) of a controlling stake in National Bank of Oman (NBO), in some ways proved two rules. On the one hand, the management agreement signed between the two banks was set at three years. ‘CBQ was very careful to emphasise that this was not a case of a Qatari bank taking over one of the sultanate’s national institutions,’ says an NBO official. On the other, NBO has had a chequered history in recent years, returning to profitability only in 2004. The few bank mergers that have occurred in the GCC have tended to be driven by one of the parties experiencing troubled times, rather than being marriages of equal partners.

In the absence of an epiphany, Gulf institutions are increasingly looking to expand further afield. On the Islamic side, the links with Malaysia are strengthening, with Dubai Islamic Bank (DIB), Kuwait Finance House and Al-Rajhi Banking & Investment Corporation all holding licences there. On the conventional side, for Gulf and international banks alike, the most rapidly opening market is Egypt, which has witnessed a flurry of activity in the sale of state-owned and public/private joint venture banks, driven by Cairo’s reformist government. In late August, the local subsidiary of Societe Genera