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GCC banks — including those in the UAE — possess the capital strength to weather a two-month escalation in the US-Iran conflict, but the cost of that resilience will likely be a massive haircut to 2026 dividend payouts, according to a Bloomberg Intelligence report picked up by Asharq Business.
Banks may need to slash dividends by as much as 50% to keep core capital ratios (CET1) safely above the 13% threshold, the agency suggests. This comes as the sector prepares to absorb a 5-15% hit to earnings driven by rising risk costs and a slowdown in credit growth.
The rationale: Halving 2026 dividends could preserve an estimated USD 10 bn in capital across the regional sector. For UAE lenders, this move would provide a critical “safety margin,” adding roughly 50 bps to the industry’s risk-weighted assets to buffer against the volatility of a closed Strait of Hormuz.
Among local players, Abu Dhabi Islamic Bank, Dubai Islamic Bank, and Sharjah Islamic Bank were flagged as having relatively tighter capital cushions compared to the top-tier giants. While the UAE banking system remains a global leader in stability, the report suggests that any institution seeing its CET1 ratio slide toward 14% or lower will likely prioritize fortress balance sheets over aggressive investor distributions.
Banks are saying they can ride out the shock: Banking executives including Henrik Raber, head of global banking at Standard Chartered in Dubai, report “no real impact to date” and point to strong liquidity across the system, The National reports.
The bigger risk may be indirect — rising oil prices are keeping interest rates higher for longer, raising the odds of loan defaults.
What’s next: The UAE is shifting from a period of record-breaking dividends to a strategic capital preservation phase. If the conflict persists past the 60-day mark, these dividend cuts will transition from a precaution to a necessity. Expect banks to lean on the CBUAE’s proactive support packages — including reserve flexibility and loan deferrals — while potentially tightening credit for non-essential projects to protect liquidity.
REMEMBER- Policy support is already in play: As we’ve previously reported, the Central Bank of the UAE rolled out a resilience package to freeup additional liquidity and support growth.
