UAE Bank Loan Growth Accelerates; Overseas Operations Strengthen
UAE banks’ loan growth gathered pace in the third quarter of 2025 (3Q25), supported by a strong domestic operating environment, healthy liquidity conditions, and higher overseas lending by larger institutions, Fitch Ratings says.
Fitch expects international operations at large UAE banks to continue expanding in 2026. This will be supported by strong demand from Saudi Arabian borrowers, due to tighter and more expensive liquidity locally as strong loan growth continues to outpace deposit growth.
Aggregate loans rose by AED150 billion, or 6% in 3Q25. Non-annualised loan growth reached 15% (AED330 billion) in 9M25, exceeding the 11% rise in full-year 2024.
According to Fitch, combined overseas lending at First Abu Dhabi Bank, Emirates NBD and Abu Dhabi Commercial Bank increased by about AED90 billion in 9M25, representing roughly a quarter of sector lending growth.
Impaired loans declined by AED4 billion in 3Q25 and by AED9 billion since end-2024, driven by write-offs, bad-debt sales and recoveries.
The impaired loans ratio fell to 3.1% at end-3Q25 from 3.5% at end-2Q25 and 3.9% at end-2024. The average cost of risk was 40 bp, and total loan loss reserves covered impaired loans by 104% at end-9M25.
Margins moderated, but profitability remained strong. The sector average net interest margin (NIM) decreased to 2.9% in 9M25 from 3% in 2024. This reflected rate cuts in 2H24 and moderately higher competition for liquidity.
Fitch expects NIMs to soften further in 2026 and to be at 2.5%–2.7% over the longer term. Despite the lower NIM, the sector’s return on average equity was 19%, supported by low impairment charges that consumed a record-low 5% of pre-impairment operating profit in 9M25.
Abu Dhabi Islamic Bank had the highest return on average equity among Fitch-rated banks at 30% in 9M25. Sector deposits rose by 13% during 9M25, slightly below loan growth, pushing the loans/deposits ratio up by 130bp to 80.2% at end-9M25.
Fitch views UAE liquidity conditions as healthy, although continued strong overseas expansion could intensify competition for funding. Capitalisation is healthy, Fitch said, adding that the average core Tier 1 capital ratio was stable at 13.9% at end-3Q25, as lending growth was offset by profits.
Average Tier 1 and total capital ratios declined by 20bp and 50bp, respectively, as additional Tier 1 and Tier 2 components grew more slowly than core Tier 1. Both average Tier 1 (15.7%) and total capital (16.7%) ratios remain strong, in Fitch’s view. #UAE Bank Loan Growth Accelerates; Overseas Operations Strengthen Meta, NDPC Settle $32.8m Data Privacy Fine Out of Court
