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Moody’s is upbeat on UAE banks this year: Moody’s Ratings’ outlook for the UAE banking sector is now positive, up from just “stable,” as banks head into the year with a strong monetary base and ample liquidity, Al Bayan reports. Lower interest rates will actually be good news for credit rather than bad news, given demand for lending and banks’ renewed focus on credit, according to Moody’s.
Moody’s expects 2026 to be a year of more capital deployment and lending for banks, whereas the past three years have been focused on balance sheet cleanup, the rating agency noted.
Banks in Dubai will also benefit from the economic momentum, alongside a bigger budget for the next two years and increased infrastructure spending, Moody’s VP and Senior Analyst Badis Shubailat told the news outlet. The emirate had approved its largest ever budget for 2025-2027, with some AED 272 bn earmarked for spending.
By the numbers
Strong operating conditions and enhanced asset quality have left UAE banks with a comfortable 70-75% loan-to-deposit ratio. This liquidity surplus, coupled with a projected 4.5% growth in the non-oil economy, positions the sector to aggressively boost lending as interest rates ease, Shubilat said.
Banks’ assets rose 17.1% y-o-y to AED 5.3 tn as of December 2025, according to a report (pdf) from the CBUAE’s Monetary and Banking Developments. Gross credit also increased to 2.6 tn, up 17.9% y-o-y over the same period, while total deposits rose 16.2% y-o-y to reach AED 3.31 tn.
Moody’s view that lending conditions will improve is the consensus — but there’s a caveat
As we reported earlier this year, the general outlook for banks in the UAE is rosy, supported by strong growth in international operations and an expected 10-12% increase in consumer lending, according to previous S&P Global forecasts. Banks are also expected to see strong growth when it comes to international operations, with loan growth potentially accelerating to 17%.
Yes, but… This could come alongside a slight long-term decline in margins to settle between 2.5-2.7%. Banks’ performance will depend on their ability to maintain asset quality amid rapid expansion in consumer lending.
