UAE banks saw a 12.6% increase in lending in 2024 and are expected to keep growing in 2025, according to a report
Banks in the UAE saw a 12.6% increase in lending in 2024, mainly because retail loans went up by 19.9%, showing strong growth.
UAE Banks’ Performance in 2024
A new report from consultancy firm Alvarez & Marsal (A&M) shows that corporate and wholesale loans made up 55.5% of the total loans given by UAE banks in 2024.
The total net interest income of UAE banks increased by 6.7% to $26.6 billion (AED 97.6 billion), but this was the slowest growth in three years.
Income from fees and commissions jumped by 22%, thanks to strong performances by major banks like Emirates NBD (ENBD), First Abu Dhabi Bank (FAB), and Abu Dhabi Commercial Bank (ADCB). Meanwhile, lower impairment costs helped push net income up by 8% to $22.6 billion (AED 82.9 billion).
However, a new corporate tax in the UAE caused banks’ tax expenses to rise sharply by 190.1%, affecting their overall income growth.
The total operating income of UAE-listed banks grew by 10.7%, mainly due to higher fees and commissions.
Interest Rates and Bank Efficiency
Net interest margins (NIM), which measure how much banks earn from loans after funding costs, dropped by 12 basis points to 2.7%. This was because funding costs increased more than loan yields, even though the yield on credit rose by 91 basis points to 12.2% due to aggressive rate cuts.
UAE banks remained focused on controlling costs and maintaining strong asset quality. Their cost-to-income ratio stayed below 30%, and their cost-of-risk fell to a 10-year low of 0.5%.
Loan and Deposit Growth
Loans and advances from the top 10 UAE banks grew by 12.6%, while deposits increased by 10.7%. Because loans grew faster than deposits, the Loan-to-Deposit Ratio (LDR) rose by 130 basis points to 76.2%.
Among banks, Abu Dhabi Islamic Bank (ADIB) and ADCB saw the highest deposit growth at 16.3% and 16%, respectively. However, other big banks like FAB, ENBD, ADCB, Dubai Islamic Bank (DIB), and Mashreq saw slower deposit growth.
The report is based on data from the ten largest listed banks in the UAE.
Expert Insights
Asad Ahmed, Managing Director for Middle East financial services at A&M, said that interest rate cuts by the UAE Central Bank have started, following the U.S. Federal Reserve’s lead. He expects these cuts, along with strong economic growth from consumer spending, tourism, and construction, to help UAE banks continue earning well in 2025.
Anton Lopatin, Senior Director at Fitch Ratings, predicts that UAE banks’ loan books will grow by 9%-10% in 2025, but profitability may be slightly lower than in 2024. He added that UAE banks’ performance may slow down in 2025 as lower interest rates reduce their margins.
Published: 3rd March 2025
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