UAE’s banking sector delivered a steady performance in Q2 2025, with strong loan growth, improved cost efficiency, and resilient earnings despite mounting pressure from higher impairments and margin compression, according to Alvarez & Marsal’s (A&M) latest UAE Banks Report and Banking Pulse.
Net loans and advances across the country’s ten largest listed banks rose 5% quarter-on-quarter (QoQ), outpacing deposit growth of 2.8%. This drove the loan-to-deposit ratio (LDR) up to 76.2%. Operating income increased 3.9% QoQ, supported by a healthy 8.7% rise in non-interest income, while net interest income inched up by 1.3%.
The latest UAE Banks Report highlights key trends and forecasts for the sector, providing valuable insights for stakeholders.
However, net income growth was subdued, up just 0.2% QoQ to AED 22.2 billion, as higher impairment charges offset revenue gains. The cost-to-income ratio improved to 27.5%, reflecting stronger efficiency, while the cost of risk rose to 0.51%.
On profitability, sector-wide return on equity (RoE) improved to 18.9%, while return on assets (RoA) edged down slightly to 2%. Net interest margins (NIMs) contracted by 9bps to 2.43%.
Sam Gidoomal, Managing Director and Head of Middle East Financial Services at A&M, said:
“Strong earnings resilience and capital strength continue to support UAE banks’ position in regional markets. Investor confidence is reflected in the sector’s premium valuations, as banks prepare for opportunities in M&A, dividend payouts, and regional expansion.”
The report also noted that while credit growth remains robust, higher risk costs and narrowing margins highlight the importance of strategic discipline in an evolving rate environment.
Asad Ahmed, Managing Director at A&M, added:
“UAE banks delivered a steady performance in Q2 2025, with strong credit growth, stable income, and continued cost efficiency gains. While margin compression and higher impairment charges added pressure, the sector’s fundamentals remain sound.”
The analysis covered the country’s top lenders, including First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank, Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Fujairah (NBF), National Bank of Ras Al-Khaimah (RAK), and Sharjah Islamic Bank (SIB).
