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 UAE Banking Pulse FY 2024 report (pdf). 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.

However, profitability metrics weakened, with return on equity declining by 87 bps to 18.9% and return on assets falling by 6 bps to 2.1%, as banks navigated rising funding costs, rate cuts, and a new corporate tax regime. The introduction of the corporate tax led to a 190.1% y-o-y jump in tax costs, impacting net earnings.

REMEMBER- The Central Bank of the UAE also chose to cut rates last december in line with the US Federal Reserve’s interest rate policies due to the AED being pegged to the USD, lowering the overnight deposit rate by 25 bps to 4.4%.

Total loans and advances (L&A) grew by 12.6% y-o-y, outpacing deposit growth of 10.7% y-o-y, pushing the loan-to-deposit ratio up by 130 bps to 76.2%. Retail lending led the charge, surging 19.9% y-o-y, while corporate and wholesale lending, which still accounts for 55.5% of loan books, grew at a slower 6.3% y-o-y.

Among individual banks, Abu Dhabi Islamic Bank (Adib) posted the highest L&A growth at 24% y-o-y, while Emirates NBD reported a strong 12.7% y-o-y increase and Abu Dhabi Commercial Bank (ADCB) saw L&A grow 16.1% y-o-y. Dubai Islamic Bank (DIB) lagged behind, with L&A growth slowing to 6.5% y-o-y.

On the deposit side, time deposits surged 11.1% y-o-y, while current and savings accounts deposits grew by 8% y-o-y, making up 49.9% of total deposits. Adib led deposit growth at 16.3% y-o-y, followed by ADCB at 16% y-o-y, while First Abu Dhabi Bank (FAB) saw a slowdown to just 3% y-o-y due to a decline in government deposits.

Despite strong lending activity, net interest margins declined by 12 bps y-o-y to 2.7%, as higher funding costs offset yield gains. The cost of funds jumped 130 bps y-o-y to 4.6%, while the yield on credit rose by 91 bps y-o-y to 12.2%.

On the flip side, UAE banks saw a sharp 26.8% y-o-y decline in impairment charges, helping support net income growth. Cost of risk fell to a five-year low of 0.5%, down 25 bps y-o-y, as most banks reduced their exposure to riskier sectors like real estate and construction.

A&M remains optimistic: “Despite expected monetary policy tightening, strong government support and healthy capital position should help banks continue its earnings growth momentum into FY25,” A&M said. UAE banks have also responded well to competition from fintech and neobanks through digital initiatives, the report added.

REMEMBER- Earlier this week, Moody’s adjusted its outlook on the UAE’s banking sector from positive to stable, citing expected declines in profitability as interest rates fall and corporate taxes rise. S&P Global also predicted a slight decline in UAE banks’ net incomes, following two years of high earnings buoyed by rising interest rates. Lending activity remains a key stabilizing factor for the sector, S&P Global said.

Who are the 10 largest banks in terms of assets? FAB leads the table with AED 1.2 tn in assets, followed by Emirates NBD at AED 996.6 bn and ADCB at AED 652.8 bn. DIB held AED 344.7 bn in assets, while our friends at Mashreq stood at AED 267.5 bn and Adib at AED 225.9 bn. Commercial Bank of Dubai recorded AED 140.2 bn, with RAK Bank at AED 88.3 bn, Sharjah Islamic Bank at AED 79.2 bn, and National Bank of Fujairah rounding out the list at AED 60.9 bn.

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