International banking giant UBS is intensifying efforts to deploy client cash held at Middle Eastern banks, converting ultra-high-net-worth clients' low-yield cash positions into a leveraged Gulf carry trade strategy. Under this approach, clients borrow funds and layer them into deposits at institutions such as Qatar National Bank and Al Rajhi Bank, which offer savings rates of approximately 5%, capitalizing on high deposit yields while the dollar pegs mitigate some foreign exchange risk.

This emerging strategy not only amplifies client cash returns but also generates structured design fees and financing income for UBS. However, the leverage introduces tail risks, including rising financing costs, counterparty exposure, liquidity concerns, and potential currency peg unwinding. Particular vigilance is warranted regarding the repricing of risk premiums in the Gulf region amid ongoing US-Iran geopolitical tensions.

According to sources familiar with the matter, UBS is expanding its offering of leveraged deposit products tied to Middle Eastern banks to capitalize on the region's elevated savings rates. The Swiss financial powerhouse recently pitched wealth management clients on incorporating borrowed funds into deposits at Qatar National Bank QPSC to boost returns, with details remaining confidential as the sources requested anonymity. Qatar National Bank stands as the largest bank in the gas-rich peninsula nation situated in the Persian Gulf.

Previously, the Zurich-based giant had offered a nearly identical product for Al Rajhi Bank, Saudi Arabia's largest bank by market value. The pegging of both the Saudi riyal and Qatari riyal to the US dollar curbs conventional currency fluctuations, rendering local high-yield deposits a relatively straightforward leveraged carry target for UBS.

In recent months, Al Rajhi Bank has advertised savings rates of roughly 5.1%. Qatar National Bank has also offered comparable rates this year through its Doha and London branches for deposits of at least £100,000 ($136,000), with final approvals determined by the bank's UK subsidiary. A UBS spokesperson declined to comment, and representatives for Doha-based Qatar National Bank did not respond to requests for comment. By total assets, the institution ranks among the largest commercial banks in the Middle East, with Qatar's sovereign wealth fund serving as its biggest shareholder.

This push underscores UBS's emphasis on the affluent Gulf region, even as the protracted US-Iran conflict tests investment appetite. Year-to-date, UBS's US-listed ADR has climbed approximately 20%, buoyed by diversification strategies and a boom in high-net-worth client equity investments, significantly outperforming the S&P 500 benchmark index.

The deposit strategy, targeting some of the Middle East's largest banks, represents a variant of carry trading. Since both the Saudi riyal and Qatari riyal are pegged to the dollar, foreign exchange risk is partially contained. Banks providing leveraged deposits can earn revenue through upfront structuring fees while also offering financing to clients seeking to enhance the relatively low-risk component of their portfolios.

A UBS survey this year of 307 institutions managing assets for ultra-high-net-worth families revealed that these firms typically allocate nearly 9% of their portfolios to cash in 2025. The attractive savings rates offered by Middle Eastern banks highlight how major domestic projects in Gulf states—such as Qatar's hosting of the 2022 World Cup—have driven local lenders to attract fresh global capital, alleviating long-term pressures from domestic financing needs.

Qatar National Bank serves as a vital funding source for the energy sector, which positions Qatar as one of the world's largest LNG suppliers. Over the past decade, the bank has expanded its international footprint into markets like Turkey and Egypt, helping to absorb new deposits. As of June, its total managed assets reached QAR 1.4 trillion (approximately $395 billion), with its loan-to-deposit ratio widening nearly 10% over the past decade, underscoring loan book growth. However, according to Bloomberg-compiled data, non-performing loans in Qatar National Bank's portfolio stood at 2.5% in the first half of this year, less than half the highest level among Gulf banks.