UAE banks have plenty of savers, but it’s coming at a higher cost
(MENAFN- Golin Mena) Abu Dhabi, United Arab Emirates – November 04, 2026: UAE banks are not short of deposits; they are short of low-cost funding, and that shift is now one of the main forces shaping the sector's earnings.
What has changed is where the money sits. Central bank data show balances in savings and fixed-term accounts, which pay interest, have risen sharply, while money in current accounts, which pay little or nothing, has slipped. This suggests savers are not pulling money out of banks but moving it to where it earns more, said, Nagham Hassan, Market Analyst at etoro.
Deposits are still growing, but lending is running ahead of deposits. Figures from the Central Bank of the UAE show domestic credit up 15.3% in the year to August. Resident deposits, on the other hand, rose 12.5%.
Since June, domestic credit has grown 4.3% against 1.5% for resident deposits, and the large banks that have reported third-quarter results show the same gap on their own balance sheets. Companies are the biggest borrowers, but loans to households, state-linked companies and the government are growing faster. Banks need more deposits to fund that lending, and the deposits they are winning cost more.
So, who is paying for lending that is outpacing deposits? Part of the gap is likely being filled by banks drawing on the liquidity they built up in earlier years, and another part by borrowing on bond and wholesale markets, which also comes at a cost. Over the year to August, banks’ liquid-assets ratio has slipped to 16.9% from 19.8%, and borrowing from banks abroad is up 46%. This suggests banks themselves are absorbing much of the bill, which helps explain why most of the large lenders that reported third-quarter results saw their margins narrow. Lenders with international bond-market access and strong credit ratings appear better placed.
The sector's foundations remain solid. Central bank data show banks hold a healthy capital buffer to absorb losses, and the share of problem loans fell at the large banks that have reported.
For borrowers, credit remains readily available, but if deposits keep lagging lending, banks with higher funding costs may pass more of it onto them.
Investors in listed UAE bank shares will want to see whether deposit growth catches up with lending in the fourth quarter and whether margins steady as a result. The central bank’s resilience package, which includes relief for borrowers, ends on 15 January 2027, a test of how well loan quality holds up without it. Funding costs will show how far the pressure reaches across the sector.
What has changed is where the money sits. Central bank data show balances in savings and fixed-term accounts, which pay interest, have risen sharply, while money in current accounts, which pay little or nothing, has slipped. This suggests savers are not pulling money out of banks but moving it to where it earns more, said, Nagham Hassan, Market Analyst at etoro.
Deposits are still growing, but lending is running ahead of deposits. Figures from the Central Bank of the UAE show domestic credit up 15.3% in the year to August. Resident deposits, on the other hand, rose 12.5%.
Since June, domestic credit has grown 4.3% against 1.5% for resident deposits, and the large banks that have reported third-quarter results show the same gap on their own balance sheets. Companies are the biggest borrowers, but loans to households, state-linked companies and the government are growing faster. Banks need more deposits to fund that lending, and the deposits they are winning cost more.
So, who is paying for lending that is outpacing deposits? Part of the gap is likely being filled by banks drawing on the liquidity they built up in earlier years, and another part by borrowing on bond and wholesale markets, which also comes at a cost. Over the year to August, banks’ liquid-assets ratio has slipped to 16.9% from 19.8%, and borrowing from banks abroad is up 46%. This suggests banks themselves are absorbing much of the bill, which helps explain why most of the large lenders that reported third-quarter results saw their margins narrow. Lenders with international bond-market access and strong credit ratings appear better placed.
The sector's foundations remain solid. Central bank data show banks hold a healthy capital buffer to absorb losses, and the share of problem loans fell at the large banks that have reported.
For borrowers, credit remains readily available, but if deposits keep lagging lending, banks with higher funding costs may pass more of it onto them.
Investors in listed UAE bank shares will want to see whether deposit growth catches up with lending in the fourth quarter and whether margins steady as a result. The central bank’s resilience package, which includes relief for borrowers, ends on 15 January 2027, a test of how well loan quality holds up without it. Funding costs will show how far the pressure reaches across the sector.
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