UAE Banks Lead GCC In Revenue And Lending Growth Amid Strong Economic Momentum

Banks in the UAE outperformed their regional peers in the second quarter of 2025, posting the highest revenue and lending growth across the Gulf Cooperation Council (GCC), a study showed.

According to the latest GCC Banking Sector Report by Kamco Invest, UAE-listed banks recorded a 5.3 per cent quarter-on-quarter (q-o-q) increase in revenues, amounting to $13.3 billion, the highest among GCC countries. This surge was driven by a 10.1 per cent rise in non-interest income, reflecting strong fee-based activity and diversified revenue streams. Net interest income also grew by 1.8 per cent, reaching $7.6 billion, supported by continued expansion in gross loans.

The UAE banking sector led the region in lending growth, with gross loans rising 4.6 per cent q-o-q, or $29.8 billion, to reach $672.8 billion by the end of Q2. The growth was broad-based, with notable increases in personal loans, property development, retail and wholesale trade, construction, and manufacturing. The Central Bank of the UAE's credit sentiment survey highlighted steady demand from both individuals and businesses, underpinned by rising household incomes and a supportive investment climate.

Customer deposits also saw robust growth, climbing 4.1 per cent q-o-q to $941.0 billion, the highest in the GCC. Despite this, the UAE maintained the lowest loan-to-deposit ratio in the region at 67.9 per cent, indicating strong liquidity and prudent lending practices.

Operational efficiency improved during the quarter, with operating expenses declining by 6.1 per cent to $4.6 billion, the sharpest drop among GCC peers. This contributed to a reduction in the cost-to-income ratio to 38.0 per cent, down 70 basis points from the previous quarter.

However, the quarter was not without challenges. Loan impairments in the UAE more than doubled, rising from $0.39 billion to $0.50 billion, as most banks reported higher provisions. This pushed the cost of risk to 0.50 per cent, slightly above the GCC average, though still below historical levels, suggesting stable asset quality amid cautious provisioning.

Despite the uptick in impairments, UAE banks continued to deliver strong returns. The sector posted the highest return on equity (RoE) in the GCC at 16.4 per cent, although this marked a slight decline for the fourth consecutive quarter. Analysts attribute the resilience in profitability to disciplined cost control, diversified income sources, and robust credit growth.

The report also noted that UAE banks maintained the highest net interest margin (NIM) in the region at 3.26 per cent, despite a marginal decline from 3.34 per cent in Q1, reflecting the impact of regional rate cuts.

Overall, the UAE banking sector's performance in Q2 2025 underscores its leading role in the GCC, driven by strong fundamentals, economic diversification, and strategic lending. With continued momentum in non-oil sectors and a healthy pipeline of projects, UAE banks are well-positioned for sustained growth in the coming quarters.

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