UAE Banks Set For Strong 2026 As Profits, Lending Surge Fuel Outlook

2026-02-08 04:15:50

(MENAFN- Khaleej Times) The UAE banking sector is heading into 2026 on a strong footing after delivering record-breaking financial results in 2025, supported by robust non-oil economic growth, high interest rates and sustained corporate lending activity.

Leading lenders such as First Abu Dhabi Bank (FAB), Abu Dhabi Commercial Bank (ADCB), and Emirates NBD posted strong gains in profitability, balance sheet expansion, and non-interest income last year, reinforcing confidence that the sector will remain one of the key pillars of the UAE's economic expansion in 2026.

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FAB reported a nearly 24 per cent surge in 2025 net profit to Dh21.1 billion ($5.7 billion), supported by a 16 per cent rise in revenue and a sharp increase in non-interest income, which climbed 36 per cent. ADCB also posted a record year, with full-year net profit rising 22 per cent, while exceeding fourth-quarter forecasts with a 30 per cent year-on-year jump in quarterly earnings. Emirates NBD continued to deliver strong performance in both retail and corporate banking, with its loan book expanding by about 26 per cent during the year.

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Across the sector, strong credit demand and deposit inflows drove steady balance sheet growth. Data for the top 10 UAE banks showed net loans rising about 6.5 per cent quarter-on-quarter in the third quarter of 2025, while deposits grew 4.3 per cent. Total banking sector assets climbed 18.1 per cent year-on-year by September 2025, reflecting robust lending activity and strong liquidity conditions.

What was behind the banking sector's performance?

The banking sector's performance was underpinned by solid macroeconomic momentum, with the UAE economy estimated to have expanded by around 4.9 per cent in 2025, driven by non-oil growth in trade, tourism, construction and financial services. Strong government spending, rising private sector investment and expanding business activity supported credit growth across corporate and retail segments.

Analysts say the outlook for 2026 remains positive despite expectations of gradual global interest rate cuts, which could modestly compress net interest margins. Ratings agencies including S&P Global Ratings and Fitch Ratings expect UAE banks to maintain strong profitability and asset quality, supported by resilient economic growth, healthy capital buffers and ample liquidity.

S&P has projected that UAE banks will continue to benefit from strong operating conditions and stable funding profiles, although earnings growth may moderate slightly as interest rates ease. Fitch also expects the sector to remain resilient in 2026, citing solid capitalisation, improving asset quality and continued government support as key strengths.

Both agencies highlight that high levels of capital and liquidity will allow banks to comfortably absorb any pressure on margins, while diversified revenue streams - including fees, commissions and investment income - will help sustain profitability. Increasing exposure to government-related entities and large corporate projects is also expected to support credit growth.

Another defining trend shaping the sector is rapid digital transformation. UAE banks are investing heavily in artificial intelligence, automation and digital platforms to improve efficiency and enhance customer experience. Several leading banks now report hundreds of thousands of active users on digital channels such as WhatsApp banking, reflecting a sharp shift towards mobile and online transactions. Industry estimates suggest that more than 750,000 customers are already using conversational banking platforms offered by major institutions.

This digital push is expected to reduce operating costs, improve cross-selling opportunities and open new revenue streams, particularly in payments, wealth management and SME financing. It also aligns with the UAE's broader ambition to position itself as a global hub for fintech and digital finance.

Corporate lending is likely to remain a key growth driver in 2026, supported by infrastructure projects, energy investments and expansion by government-related entities. Retail lending, particularly mortgages and personal finance, is also expected to stay robust amid continued population growth and strong real estate activity.

While global uncertainties and interest rate adjustments could pose challenges, the UAE banking sector enters 2026 with strong fundamentals, record profitability and improving diversification. With healthy balance sheets, expanding digital capabilities and sustained economic momentum, banks are well positioned to navigate a changing rate environment and continue supporting the country's growth agenda.