Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE’s banking sector continues to demonstrate remarkable resilience and strength, achieving new milestones across key financial indicators in 2024 despite global economic headwinds, according to Kamco Invest report on GCC banks.
UAE-listed banks registered the strongest growth in customer deposits among their GCC peers during the fourth quarter of 2024, reaching $847.2 billion, reflecting a quarter-on-quarter (q-o-q) increase of 2.3%. This performance underscores the confidence of both individuals and businesses in the UAE’s robust financial system.
In terms of lending, UAE banks also maintained their momentum, posting a Q-o-Q growth of 2.5% in gross loans, adding $16 billion during the quarter. Aggregate gross loans stood at $589.7 billion at the end of Q4 2024, highlighting the banks’ growing role in supporting the country’s expanding economy.
The UAE banking sector’s net interest income rose by a healthy 3.0% during the quarter, contributing to an overall strong revenue growth. Total bank revenues for UAE-listed banks surged by 5.4%, with an impressive absolute increase of $646.4 million, the highest among all GCC countries. Notably, non-interest income grew even faster, rising by 9.2%, further diversifying income streams for the banks.
UAE banks continued to lead the region in profitability and operational efficiency. They posted the highest return on equity (RoE) among GCC banks at 16.7% by the end of 2024, significantly above the regional average of 13.7%. This strong RoE, despite a slight sequential dip of 10 basis points, reflects robust earnings power and efficient capital utilisation.
Additionally, net interest margins (NIMs) for UAE banks remained the highest in the GCC at 3.39%, showcasing their ability to maintain strong lending spreads despite a challenging interest rate environment.
While impairments rose during Q4—totaling $1.23 billion, marking an increase of about 60% Q-o-Q—analysts note that the cost of risk for UAE banks remains contained at 0.49%, indicating stable asset quality and disciplined risk management.
Liquidity conditions for UAE banks also remain sound. The loan-to-deposit ratio stood at 69.6% at the end of Q4 2024, one of the lowest in the GCC.
“In terms of liquidity needs, banks in the UAE continue to remain in a comfortable position to finance future growth as the loan-to-deposit ratio remains the lowest in the GCC,” Kamco Invest report said.
UAE's strong private sector credit demand was another positive signal. According to the report, business credit conditions improved towards the end of the year, with increased loan demand across sectors such as retail and wholesale trade, construction, property development, manufacturing, and transport.
Overall, the UAE banking sector enters 2025 from a position of strength, backed by solid balance sheets, diversified revenue streams, and strong shareholder returns. These factors position the country’s banks to capitalise on new opportunities in a rapidly evolving economic landscape.
