The combined net income of the UAE’s 10 largest listed banks rose 8.4% q-o-q to AED 22.2 bn in 1Q 2025, despite interest margin losses on the back of rate cuts in the previous quarter, according to management consulting firm Alvarez & Marsal’s UAE Banking Pulse report (pdf). Growth was supported by a 59.3% q-o-q reduction in impairment charges and an 18% quarterly rise in net fee and commission income, the report reads.

REMEMBER- The Central Bank of the UAE cut rates by 50 bps last September, and 25 bps in November and December in line with the US Federal Reserve.

Net interest margins fell by 15 bps q-o-q to 2.5% despite strong lending activity against the backdrop of rate cuts. Net loans and advances were up 3.6% q-o-q, primarily driven by corporate and wholesale lending, which rose 5.1% on a quarterly basis.

Banks’ deposits outpaced lending, increasing by 5.8% q-o-q, while the loan-to-deposit ratio fell to 74.7%, “reflecting improved sector liquidity.” This came in tandem with a 7.8% quarterly decline in operating expenses, which “contributed meaningfully to profitability.”

Meanwhile, the cost of funds rose by 52 bps to 3.9%, which helped offer “some margin protection.” The cost of risk (CoR) declined by 45 bps q-o-q to 0.3%, while non-performing loan (NPL) ratio also declined to 3.2%, driven by recoveries and a stronger loan book profile.

Profitability metrics were up, with return on equity climbing to 18.6% and return on assets improving to 2.1%. This came despite a 2.1% decline in net interest income (NII) during the quarter.

The banks in question: The UAE’s 10 largest listed banks analyzed in A&M’s UAE Banking Pulse are First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, Dubai Islamic Bank (DIB), our friends at Mashreq, Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Ras Al Khaimah, and Sharjah Islamic Bank.

Among the major banks, Abu Dhabi Islamic Bank (Adib) and Dubai Islamic Bank (DIB) reported high growth in net L&A by 5.3% and 4.8% q-o-q, respectively, followed by Emirates NBD with 3.8% quarterly growth.

A&M remains optimistic: “Despite flat operating income and the decline in NII due to prior rate cuts, the sector remained relatively resilient, supported by efficiency gains and healthy balance sheet growth. Overall, the Q1’25 pulse reflects a positive trajectory for Middle East banks, marked by solid profitability, expanding loan books, and improving return ratios, setting a strong tone for the year ahead,” A&M Managing Director, Financial Services Asad Ahmed said.

REMEMBER- The combined net income of the UAE’s 10 largest listed banks rose 8% y-o-y to AED 82.9 bn in 2024, according to Alvarez & Marsal’s report for FY 2024. Growth was supported by a 6.7% increase in net interest income to AED 97.6 bn — its slowest pace in three years — alongside a 22% rise in net fees and commission income and lower impairment charges.

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