Lending growth and lower credit losses lift Q3 earnings, while deposit growth lags at UAE banks.
Dubai: UAE banks are maintaining earnings growth through expanding loan portfolios, higher fee income and improved credit quality. However, third-quarter results have brought the cost of funding further lending into sharper focus.
First Abu Dhabi Bank, Emirates NBD and Abu Dhabi Commercial Bank, the three largest listed UAE lenders by market capitalisation, all reported higher earnings for the first nine months of the year. Their results highlighted the contribution of credit growth to income, although margin pressures differed across the banks.
Abu Dhabi Islamic Bank, Mashreq and Dubai Islamic Bank also recorded growth in financing or revenue. Collectively, the October disclosures point to an expanding banking business, although lower provisions, recoveries and gains from asset disposals played varying roles in individual lenders’ earnings.
The bigger question is how banks will fund the next phase of lending growth. At several major lenders, loan expansion has outpaced deposit growth, bringing the balance between credit demand, deposit pricing and profitability into focus as the sector approaches the final quarter.
Growth beyond margins
FAB’s results illustrate how margin trends have varied across the sector. Its net interest margin increased five basis points year-on-year to 1.93%, while loans grew 10% from December, helping drive a 3% increase in nine-month net profit.
Emirates NBD and ADCB showed how higher business volumes and non-interest income could support earnings despite narrower margins. Nagham Hassan, Market Analyst at eToro, pointed to lower margins at both lenders, as well as DIB, following interest rate cuts in late 2025.
Emirates NBD’s income climbed 15%, while ADCB’s non-interest income rose 21%. At Emirates Islamic, part of the Emirates NBD group, operating profit increased 7%, although net profit remained broadly unchanged. This highlights how stronger business activity does not always translate into equivalent growth in bottom-line earnings.
ADIB’s financing expanded 25% year-on-year, while Mashreq’s customer loans increased 33%. DIB, meanwhile, reported a 7% rise in gross revenue, adding to evidence of continued expansion across both conventional and Islamic banking.
These figures cover different financial measures and comparison periods, rather than representing a single sector-wide growth rate. Most headline earnings announcements released in October relate to the first nine months of 2026, while individual third-quarter disclosures offer a more recent indication of business momentum.
Revenue diversification has also helped banks reduce their reliance on lending spreads. Non-interest income accounted for 43% of FAB’s operating income and 38% of ADCB’s, while ADIB generated 37% of its revenue from non-funded sources.
These streams include fees and income from other banking activities, giving lenders additional earnings sources as their loan portfolios expand. The figures also highlight how differences in business mix are shaping performance across individual banks.
Banks have continued to invest in technology and services, adding another dimension to their efforts to diversify revenue and strengthen customer relationships.
Deposits move into focus
“Loans grew faster than deposits at all four banks,” said Hassan, referring to ADCB, Emirates NBD, Commercial Bank of Dubai and DIB. Her assessment points to funding costs becoming an increasingly important factor shaping bank earnings.
Subsequent results showed a similar trend at FAB, where deposits rose 5% since December, compared with 10% growth in loans. Emirates NBD’s lending expanded 18%, excluding its acquisition of India’s RBL Bank, while deposits increased 12% on the same basis.
ADCB also reported stronger lending growth than deposit expansion. While this does not necessarily indicate a funding shortfall, it highlights the importance of attracting and retaining deposits, alongside accessing alternative funding sources, as banks grow their balance sheets.
ADIB had a relatively strong base of lower-cost funding, with current and savings accounts accounting for 60% of its deposits. Mashreq reported a similar share of 58%, while also tapping international bond markets for additional funding during the third quarter.
Among lenders further down the market-capitalisation rankings, CBD’s net loans increased 8.5% since December, against deposit growth of just 0.7%. RAKBANK reported annual loan growth of 23% and deposit growth of 21%, with higher time deposits providing longer-term funding for lending and investment activities.
Improving credit quality supports earnings
Asset quality remained a source of support for several major UAE lenders. FAB’s non-performing loan ratio declined to 2.1% from 2.6% a year earlier, while Emirates NBD’s impaired loan ratio fell to 2%, despite higher provisions at DenizBank.
Hassan pointed to lower loan-loss charges at ADCB as one of the factors behind its profit growth. ADIB’s impairment charges declined 12%, while Mashreq moved from recording an impairment charge a year earlier to reporting a net release, providing an additional boost to earnings.
CBD also benefited from lower impairment losses. At RAKBANK, the impaired loan ratio improved to 1.7%, although its reported profit growth also reflected a Dh473 million gain from the sale of its merchant acquiring business.
National Bank of Fujairah recorded lower impairment provisions, supporting an increase in pre-tax profit. Sharjah Islamic Bank presented a different picture: its non-performing financing ratio declined, but impairment allowances increased. This illustrates that improvements in asset quality do not necessarily translate into lower provisioning expenses.
Ajman Bank also reported a decline in its non-performing financing ratio alongside growth in customer financing. These results extend evidence of improving credit metrics beyond the largest lenders, although provisioning trends continued to vary across the sector.
Capital provides room for expansion
Capital adequacy remained another important factor supporting banks’ lending ambitions. FAB reported a common equity tier 1 ratio of 14%, while ADIB said its Dh1.75 billion rights issue would strengthen its capital base and support future expansion.
Overall, the results highlight how UAE banks are balancing loan growth against funding costs, rather than relying on a single earnings driver. Lending expansion, fee income and recoveries supported the October disclosures, while the contribution from margins and exceptional gains differed across individual lenders.
“The price of funding will be one of the biggest swing factors for fourth-quarter profits,” Hassan said.
