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2025 may have been the year of monetary easing, but the UAE banking sector still managed to eke out bottom line growth throughout the year. The Central Bank of the UAE (CBUAE) pushed through successive cuts in September, October, and December in line with the US Federal Reserve, bringing the base rate to 3.65%.

DATA POINT- In 3Q 2025, the country’s top 10 banks saw their aggregate net income rising 4.3% to reach AED 23.6 bn.

What’s behind the growth? Net interest income (even as interest rates came down) and income from fees and commissions were the primary engines of bottom line growth for UAE banks throughout the year. In 3Q 2025 alone, Alvarez and Marsal data indicated that fees and commission income rose 7.3% q-o-q and interest continued to play a big role, as net interest income edged up 5.0% to AED 26.5 bn.

These outcomes suggest a growing structural maturity within the UAE banking sector, a key takeaway for both investors and policymakers. Banks are increasingly independently managing their balance sheets, lessening their direct vulnerability to decisions made by the Fed.

International agencies give two thumbs up: Fitch Ratings and Capital Intelligence gave UAE banks a stable outlook, reflecting the strength of the sovereign rating at (AA-). While Moody’s adjusted its outlook to “stable” as a precautionary measure, S&P Global affirmed strong credit ratings, noting that risks associated with consumer lending — which grew by 13.6% annually to reach AED 540 bn — remain manageable.

The upshot: Rising appetite for credit

Domestic credit hit a record AED 2.5 tn by the end of October, driven by a balanced increase in local and foreign demand. This momentum is clearly reflected in the volume of banking assets, which grew by AED 650 bn in just 10 months to surpass the AED 5.2 tn mark. While some slowdown in credit demand growth was noted during the second quarter, strong economic pillars and rising household incomes ensured growth remained in positive territory. Consequently, UAE banks led the GCC region in terms of loan and revenue growth rates, enjoying the strongest net foreign asset position in the region.

Beyond the local market: Fitch reports show that international loans accounted for a quarter of the increase in total loan portfolios in the first nine months of the year, providing banks with diversified income streams.

Beyond interest rates: The financial inclusion push

Financial inclusion and digitalization has also been a hallmark of the year for the banking sector, with the CBUAE launching the National Strategy for Financial Inclusion (2026-2030), which specifically targets the empowerment of women, youth, and entrepreneurs.

As a key part of this strategy, the central bank abolished the minimum salary requirement for financing. This move is designed to open up the credit system to a large segment of new residents and low-income earners who were previously excluded.

Banks were also instructed to suspend a planned increase in minimum account balance requirements until further notice, after several major UAE banks raised the minimum balance for current accounts to AED 5k, from AED 3k, effective in June.

Gazing into the crystal ball

Major banks’ international operations are on track for more growth in 2026, with loan growth potentially accelerating to 17%, despite expectations of a slight long-term decline in margins to settle between 2.5-2.7%. That compression of margins is where the real challenge will begin, and banks’ performance will depend on their ability to maintain asset quality amid rapid expansion in consumer lending.

Consumer lending could grow as much as 10-12% next year, according to previous S&P Global forecasts, with further potential interest rate cuts seen as a tailwind as the Fed is expected to cut rates by another 50 bps in 2026. UAE banks are forecast to manage the risks they face, as the banking sector is strong enough to absorb any potential rise in consumer loan defaults, S&P noted.

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