meed-logo

line1 line2 line3
SIGN IN / REGISTER

UAE banks enjoy the good times

13 October 2023

MEED's November 2023 special report on the UAE also includes: 

> UAE construction sector returns to form
> Hail and Ghasha galvanises UAE upstream market
> UAE closes ranks ahead of Cop28
> UAE ramps up decarbonisation of water sector
> UAE aviation returns to growth

 

Talk to any Gulf banking analyst and the message is unanimous: UAE banks are doing very well, and there are few clouds dampening the outlook heading into 2024.

Nearly all UAE banks have reported strong growth in operating profit on the back of higher interest rates, wider margins, good loan growth and higher fees and commissions.

“Good GDP growth and improved business confidence have also contributed to an overall sense of wellbeing,” says Karti Inamdar, senior credit analyst at CI Ratings.

Fat profits reflect the robust environment for UAE banks. The big four UAE lenders – First Abu Dhabi Bank (Fab), Emirates NBD, Abu Dhabi Commercial Bank and Dubai Islamic Bank, which account for more than three-quarters of system assets – reported a combined net profit of $7.4bn in the first six months of 2023, up from $4.4bn for the same period of 2022.

“Bottom line profit is growing significantly for the four largest UAE banks, and that is a reflection of operating income growth, driven both by interest and non-interest income,” says Francesca Paolino, lead analyst at Moody’s Investors Service.

“That, in turn, has resulted from greater consumer confidence as macroeconomic conditions in the UAE remain strong.”

Region-beating returns

UAE banks topped the GCC region in the second quarter of this year in terms of return on equity, at 15.9 per cent – against a GCC-wide trend of 13 per cent. Net interest margins (NIMs) in the quarter were 3.44 per cent, compared with 2.44 per cent in the year-earlier period.

“Higher interest rates have helped banks in NIM expansion, as more than 60 per cent of banking sector deposits are still low or non-interest bearing,” says Puneet Tuli, financial institutions rating analyst at S&P Global Ratings.

Meanwhile, the cost of risk is reducing thanks to the more benign economic environment and stronger non-oil activity, which has also led to higher lending growth compared with S&P’s original expectations.

According to Fitch Ratings, UAE banks have been well-positioned for higher interest rates and, since 2021, their earning assets yields have risen more than their funding costs due to a still-high share of cheap current and savings accounts (Casa), and a large percentage of floating lending on their loan books. 

Higher interest rates and increased business volumes drove net interest income up 37 per cent in the first half of 2023, Moody’s Investors Service notes in relation to the four largest lenders. Again, interest income growth outweighed funding cost growth, as low-cost Casa accounts remained a big contributor to the banks’ funding.

The higher operating income reflects a combination of interest and non-interest income, supported by greater consumer confidence. Strong activity in non-oil sectors in the UAE, such as trade, tourism and real estate, is a pointer to this effect.

“A driver for UAE banks’ increased non-interest income is their foreign exchange and derivative income. They are also reporting higher fee-generating activity from both retail and investment banking,” says Paolino.

As of June 2023, non-interest income constitutes around one-third of the total operating income at the larger UAE banks. This reflects the large banks seeking to diversify their revenue streams while growing locally and internationally.

Robust fundamentals

Liquidity and capital positions are unsurprisingly robust, providing a layer of insulation should conditions for UAE lenders deteriorate.

The big four UAE banks maintained strong capital buffers with a tangible common equity ratio of 15.1 per cent in aggregate as of June 2023. Strong earnings contributed to higher core capital buffers, more than offsetting risk-weighted assets growth.

UAE lenders’ liquidity has been strong for several years now, given that deposit growth in the country is dependent on energy prices, which have been favourable.

“In the UAE, deposits are not difficult to find, especially if you are willing to pay a price, so it’s the cost of deposits that needs to be managed,” says Inamdar.

“There’s usually plenty of funding available in the financial system when oil prices are high.”

The main issue on the funding side is high customer concentration levels – a side-effect of the UAE’s large number of high-net-worth individuals and wealthy institutions.  

Asset quality has nonetheless improved in the UAE. New non-performing loan (NPL) classifications have declined and loan recoveries have been good, partly due to the improvement in the real estate sector, says Inamdar.

According to Moody’s, the overall NPL ratio declined to about 5 per cent as of the first half of 2023, from 5.4 per cent a year earlier, reflecting the recovering operating environment in the country. Yet this ratio is still one of the highest in the GCC.

“On the one side, you can expect some solid operating conditions to provide some improvements to NPL ratios,” says Paolino.

“But on the other side, UAE banks remain exposed to the real estate sector and also to single borrower concentrations, as well as to large loan restructurings.”

While continued high interest could stoke future asset quality problems, local banks have built up provisions with a coverage ratio in excess of 100 per cent.

Technological dividends

Looking ahead, UAE banks will focus on their digital proposition, meaning investment in innovation and technology will likely continue and operating costs remain high. 

Banks in the UAE are already benefitting from years of significant investment in technology.

“We have seen a reduction of banks' physical footprint, with one of the banks reducing its network from 50 branches to just five without any significant impact on activity,” says Tuli.

“Banks did not experience any major cyber risk issues as well. All this is helping their overall profitability.”

In terms of future growth, some cross-border forays can be expected.

For example, Fab and Emirates NBD have strong regional ambitions that could help grow their individual balance sheets. Their diversified business base – in terms of geography, products and customer segments – renders them less vulnerable to a downturn in any of the markets they operate in.

There are few downside risks facing UAE banks, barring an unexpected drop in oil prices or – notes S&P’s Tuli – a significantly higher-than-expected migration of deposits from non-interest-bearing instruments to remunerated instruments that will reduce the benefits of higher interest rates.

That should leave analysts continuing to tell a positive story about the country’s banking prospects.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11207028/main.gif
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Bidders await NWC decision on sewage contract

    17 February 2026

     

    Saudi Arabia’s National Water Company (NWC) is evaluating five bids for package 12 of its long-term operations and maintenance (LTOM12) sewage treatment programme.

    Known as the North Western B Cluster, LTOM12 forms part of the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    The contract covers the construction and upgrade of seven sewage treatment plants with a combined capacity of about 162,000 cubic metres a day (cm/d).

    As MEED understands, the companies that have submitted proposals include:

    • Alkhorayef Water & Power Technologies (Saudi Arabia)
    • Civil Works Company (Saudi Arabia)
    • Miahona (Saudi Arabia)
    • Beijing Enterprises Water Group – BEWG (Hong Kong)
    • Al-Yamama (Saudi Arabia)

    Earlier this month, MEED exclusively reported that six contractors are competing for the North Western A Cluster Sewage Treatment Plants Package 11 (LTOM11), which has an estimated value of about $211m.

    The project involves the construction and upgrade of two sewage treatment plants with a combined capacity of about 440,000 cm/d.

    The scheme is being procured on an engineering, procurement and construction (EPC) basis with a long-term operations component. 

    It is understood that contracts for LTOM11 and LTOM12 will be awarded in May.

    In January, a consortium of United Water (China), Prosus Energy (UAE) and Armada Holding (Saudi Arabia) won the main contract for the Northern Cluster Sewage Treatment Plants Package 10 (LTOM10).

    This contract was the first to be awarded under the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    NWC previously awarded $2.7bn-worth of contracts for the first phase of its LTOM programme. This comprises nine packages covering the treatment of 4.6 million cm/d of sewage water for the next 15 years.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15670141/main.jpg
    Mark Dowdall
  • Dubai tenders Al-Maktoum airport superstructure

    17 February 2026

     

    Dubai Aviation Engineering Projects (DAEP) has tendered three packages covering superstructure works for the first phase of the expansion of Al-Maktoum International airport.

    Interested bidders have until 23 March to submit their proposals.

    MEED understands that the selected contractor will undertake superstructure works on three packages:

    • West Terminal and concourse one
    • Concourse two
    • Concourse three

    Construction on these packages began in November last year, when DAEP formally selected a contractor to deliver the substructure works.

    According to an official description on DAEP’s website, the expanded airport’s West Terminal will be a seven-level, 800,000-square-metre facility with an annual capacity of 45 million passengers.

    It will be the second of three terminals at Al-Maktoum International airport, linked to the airside by a 14-station automated people-mover (APM) system.

    In August, MEED exclusively reported that DAEP had received bids from firms to build the APM at the airport. 

    The system will run under the apron of the entire airfield and the airport’s terminals. It will consist of several tracks, taking passengers from the terminals to the concourses.

    Four underground stations will be built as part of the first phase. The overall plan includes 14 stations across the airport.

    The airport’s construction is planned to be undertaken in three phases. The airport will cover an area of 70 square kilometres (sq km) south of Dubai and will have five parallel runways, five terminal buildings and 400 aircraft gates.

    It will be five times the size of the existing Dubai International airport and will have the world’s largest passenger-handling capacity of 260 million passengers a year. For cargo, it will have the capacity to handle 12 million tonnes a year.

    Construction progress

    Construction on the first phase has already begun. In May last year, MEED exclusively reported that DAEP had awarded a AED1bn ($272m) deal to UAE firm Binladin Contracting Group to construct the second runway at the airport.

    The enabling works on the terminal are also ongoing and are being undertaken by Abu Dhabi-based Tristar E&C.

    Construction on the project’s first phase is expected to be completed by 2032.

    The government approved the updated designs and timelines for its largest construction project in April 2024.

    In a statement, the authorities said the plan is for all operations from Dubai International airport to be transferred to Al-Maktoum International within 10 years.

    The statement added that the project will create housing demand for 1 million people around the airport.

    In September 2024, MEED exclusively reported that a team comprising Austria’s Coop Himmelb(l)au and Lebanon’s Dar Al-Handasah had been confirmed as the lead masterplanning and design consultants on the expansion of Al-Maktoum airport.

    Project history

    The expansion of Al-Maktoum International, also known as Dubai World Central (DWC), is a long-standing project. It was officially launched in 2014, with a different design from the one approved in April 2024. At that time, it involved building the biggest airport in the world by 2050, with the capacity to handle 255 million passengers a year.

    An initial phase, due to be completed in 2030, involved increasing the airport’s capacity to 130 million passengers a year. The development was to cover an area of 56 sq km.

    Progress on the project slipped as the region grappled with the impact of lower oil prices and Dubai focused on developing the Expo 2020 site. Tendering for work on the project then stalled with the onset of the Covid-19 pandemic in early 2020.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15669879/main.jpg
    Yasir Iqbal
  • Contractors submit revised prices for Habshan 7 project

    17 February 2026

     

    Adnoc Gas has received revised commercial proposals from contractors for engineering, procurement and construction (EPC) works on a major project to add a new gas processing train at its Habshan complex in Abu Dhabi.

    Adnoc Gas, the natural gas processing business of Abu Dhabi National Oil Company (Adnoc Group), processes about 10 billion standard cubic feet a day (cf/d) of gas across several sites, including its Asab, Bab, Bu Hasa and Habshan facilities, as well as a natural gas liquids (NGL) fractionation plant at Ruwais.

    The Habshan complex is one of the largest gas processing facilities in the UAE and across the Middle East and North Africa. Its output capacity is 6.1 billion cf/d. The complex comprises five trains and 14 processing units that receive gas feedstock from onshore and offshore fields in Abu Dhabi.

    With Adnoc Group pressing ahead with its P5 programme to raise oil production potential to 5 million barrels a day by 2027, high volumes of associated gas are set to enter the grid.

    The new train at the Habshan complex, which Adnoc Gas expects to commission in 2029, will play a key role in handling these additional gas volumes.

    MEED previously reported that contractors had submitted commercial bids for the new Habshan 7 gas train project to Adnoc Gas by the deadline of 10 December.

    Following an initial evaluation of commercial bids received, Adnoc Gas sought “best offers” from contractors for the project. Bidders submitted their revised prices by 6 February, according to sources.

    The following contractors are understood to be competing for the Habshan 7 project’s main EPC contract, as per sources:

    • Enppi (Egypt) / Petrojet (Egypt)
    • Jereh (China)
    • Larsen & Toubro Energy Hydrocarbon (India)
    • Petrofac (UK)
    • Sinopec (China)
    • Wison Engineering (China)

    MEED previously reported that contractors submitted technical bids for the project to Adnoc Gas by the deadline of 6 October.

    Adnoc Gas intends to install the Habshan 7 train adjacent to the Habshan 5 train. This will enable the new train to utilise the ullage in the Habshan 5 sulphur recovery and tail gas treatment units and optimise operations.

    The scope of work on the Habshan 7 gas train project covers the EPC of the following units:

    • New high-pressure pipeline from the main Habshan complex to the new gas train
    • Separation and condensate stabiliser unit
    • Acid gas removal unit
    • Mercury removal unit
    • Deep NGL recovery unit
    • Sales gas and residue gas compressor
    • NGL product storage and transfer pump, as well as metering skid
    • Utility units (IA, N2, PW, FW, steam generation, DM)
    • Flare unit, to be located in Habshan 5 on common derrick
    • Flare gas recovery package
    • Water treatment package
    • Non-process buildings, to be located outside the Habshan 5 train
    • Power generation system
    • NGL pipeline from Habshan 5 to Ruwais, based on an existing pipeline assessment
    • Sales gas pipeline from Habshan 5 to sales gas network.

    UK-headquartered Wood Group has performed the concept study and initial engineering design for the project.

    The Habshan 7 gas train project represents the third phase of Adnoc Gas’ Rich Gas Development programme and is estimated to be valued at $3.5bn-$4bn, according to the company’s chief financial officer, Peter Van Driel.

    In a recent call with journalists to discuss Adnoc Gas’ financial results for the full year and fourth quarter of 2025, Van Driel said Adnoc Gas expects to achieve a final investment decision on the Habshan 7 gas train project, which is designed to increase the company’s production of high-value liquids such as liquefied petroleum gas, naphtha and condensates, in the first quarter of 2026.

    Adnoc Gas issued the main EPC tender for the new Habshan 7 gas train project to contractors between 5 and 8 August, MEED previously reported. It later extended the initial technical bid submission deadline from mid‑September to 6 October.

    In April, MEED reported that Adnoc Gas had started an early engagement process with contractors for the EPC tendering phase of the Habshan 7 gas train project.

    Prior to that, Adnoc Gas issued an expression of interest (EoI) document for the project in March, to which contractors submitted responses by 8 April.

    Separately, Adnoc Gas also completed the EoI exercise for early civil and site preparation works on the Habshan 7 project in June, and is understood to have issued the main tender in the third quarter.

    ALSO READ: Adnoc Gas stalls decision on Ruwais NGL project

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15663150/main5247.jpg
    Indrajit Sen
  • Dubai seeks contractors for Jebel Ali STP expansion

    16 February 2026

    Dubai Municipality has invited contractors to prequalify for a contract covering the expansion of the Jebel Ali sewage treatment plant (STP) phases one and two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cubic metres a day (cm/d).

    The scope includes the design, construction and commissioning of infrastructure and systems required to support the increased capacity.

    The bid submission deadline is 2 April.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    As MEED understands, the project is part of long-term plans to treat about 1.05 million cm/d a day once all future phases are completed.

    The main element of the expansion, which is estimated to cost $300m, involves modifications to the secondary treatment process at Jebel Ali STP phase two.

    This includes conversion to Moving Bed Biofilm Reactor or Integrated Fixed-Film Activated Sludge systems.

    The project also includes decommissioning existing surface aerators. New blowers and associated works will be installed as part of the upgrade.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15661388/main.jpg
    Mark Dowdall
  • AD Ports to develop Douala port in Cameroon

    16 February 2026

    Abu Dhabi’s AD Ports Group and Africa Ports Development (APD) have signed an agreement to design, build and operate a new dry bulk terminal at the Port of Douala in Cameroon.

    AD Ports Group will invest about AED320m ($87m) in the development of the terminal’s first phase, which will comprise two berths and more than 450 metres of quay wall, with an annual handling capacity of about 4 million tonnes of dry bulk cargo.

    Construction is expected to begin this year, and the first phase is slated for completion in 2028.

    The concession period is 30 years.

    AD Ports Group has committed to long-term investments and operations across Africa, including in Egypt, Morocco, Tunisia, Kenya, Tanzania, Angola and the Republic of the Congo.

    The latest announcement comes shortly after it signed an agreement with Jordan’s Aqaba Development Corporation (ADC) to manage and operate the Aqaba multipurpose port.

    AD Ports will manage and operate the port under a 30-year concession agreement.

    In December last year, AD Ports Group signed a shareholder agreement with Tajikistan’s private industrial firm Avesto Group to establish a new joint venture that will provide integrated logistics and freight forwarding services across Tajikistan.

    Under the agreement, the joint venture will initially operate as an asset-light freight forwarder. It will have exclusive rights to consolidate and manage all freight and logistics activities across Avesto Group’s subsidiaries, while also offering services to third-party customers in the wider market.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15661385/main.jpg
    Yasir Iqbal