Operating income at the 32 largest GCC banks has jumped 74% between 2006 and 2012
When British banker Michael Tomalin took the top job at National Bank of Abu Dhabi in 1999, the lender had about $9bn in assets - tiny by global standards - and its operations were largely confined to the oil-rich emirate of Abu Dhabi.
Today, NBAD has a presence in 14 countries and assets of about $100bn, and is heavily involved in international businesses such as loan syndications, private banking for wealthy clients, and advising on mergers.
Such change is being repeated across the wealthy oil exporting countries of the Gulf as powerful economic trends combine to strengthen the region's local banks while humbling their foreign rivals.
It amounts to a shift in the banking industry's balance of power, which looks set to continue in coming years; NBAD, for example, has said it plans to have a presence in 41 countries across the Middle East, Africa and Asia by 2021, and sees international operations contributing 40 percent of its operating earnings by that time.
"Perceptions have changed over the years. The market recognises we are now a bank with the balance sheet muscle and the intellectual capacity to compete with global banks on level terms," Tomalin, who retires as chief executive this month, said in an interview.
Operating income at the 32 largest banks in the six-nation Gulf Cooperation Council jumped 74 percent between 2006 and 2012, according to a study by the Boston Consulting Group. Meanwhile, income at their international peers fell 9 percent.
GCC banks such as NBAD are still much smaller than the world's largest institutions, which each have over $2trn of assets, but the gap is narrowing. Assets in the GCC banking sector, two-thirds of them held by the 20 biggest local banks, increased 11 percent in 2012 to $1.47trn, estimated QNB Economics in Qatar.
One reason for the Gulf banks' success is the strength of their home economies, which have ridden out the global financial crisis of the past five years more smoothly than many economists expected, thanks to heavy spending by governments.
High oil prices have given local banks access to huge pools of funds which they can use to expand their balance sheets and make foreign acquisitions.
The fact that most of the top Gulf banks, including NBAD, are largely state-owned has probably helped them, by ensuring financial security and in some cases, access to business. Expansion of the banks fits in with the national policy of most Gulf countries, which are marketing themselves as international financial centres.
But other trends have also helped local banks. The global financial crisis has in the last few years prompted some big Western banks to pull in their horns, cutting their teams in the Gulf as they focus on repairing their balance sheets back home. This has left a gap for Gulf banks to fill.
At the same time, cash-rich Gulf banks are finding it less difficult than Western banks to meet stricter capital and liquidity requirements that are being imposed across the world under the Basel III regulatory regime.
"The regional banks have sound capitalisation, sound funding profiles and they have cleaned up their balance sheets significantly," said Paul-Henri Pruvost, an associate director at credit rating agency Standard & Poor's. "Unlike global banks, Basel III is not necessarily a constraint for these banks."
The results are beginning to show in the league tables which record individual banks' share of various sectors.
As late as 2010, Gulf banks were largely absent from investment banking league tables. But Saudi Fransi Capital, the investment banking arm of Banque Saudi Fransi, Qatar National Bank and Samba Financial Group's investment banking division held the top three spots for fees from arranging equity offerings in the Middle East last year, according to Thomson Reuters data.
They replaced Bank of America Merrill Lynch, Morgan Stanley and Deutsche Bank, which held the top spots in 2011.
Saudi Arabia's National Commercial Bank earned the most fees from arranging syndicated loans in 2012, taking in $9.4m and replacing HSBC Holdings, which was the top arranger in 2011, the data shows.
NBAD says it handled 20 debt issuance deals worth about $16.3bn in 2012, after arranging only four such issues in 2011.
Even smaller local lenders are stepping in, identifying niche business areas where they believe they have competitive advantages.
National Bank of Fujairah, based in the small emirate of Fujairah, part of the United Arab Emirates, is setting up a financial advisory business in Dubai's tax-free financial zone, it said this month.
"There's a growing demand for financial advisory services in the mid-tier market currently not served by international players," said the bank's chief executive, Vince Cook.
Another sign of the rising strength of local banks is a shift of high-profile personnel to them. A decade ago, foreign banks operating in the Gulf cherry-picked many of their executives from local institutions; now, the flow is increasingly in the other direction.
Tomalin will be replaced by Alex Thursby, who spearheaded Australia and New Zealand Banking Group's international expansion before joining the Abu Dhabi bank.
Abu Dhabi's First Gulf Bank hired Simon Penney, previously Royal Bank of Scotland's chief executive for the Middle East and Africa, to help expand its wholesale banking business, the lender said in May.
QInvest, a Doha-based bank, has appointed Michael Katounas, previously with Swiss lender Credit Suisse, to run its investment banking division. Last year, the heads of the Qatar operations of Goldman Sachs and Morgan Stanley joined local banks in that Gulf state.
"If you believe in the prospects of the region, then working for a local bank has increasingly become a better option now than being employed by a large bulge-bracket firm," said a Dubai-based banker who resigned from a global bank last year. He declined to be named because of commercial sensitivities.
"These banks are here to stay and won't run away once a crisis hits the region. They are embedded here and they are growing."