25/08/2026 03:20 AST
The five largest banks in the UAE reported a combined net profit of 38.1 billion dirhams ($10.37 billion) in the first half of 2026, representing a 7.8 percent year-on-year increase, according to an analysis.
These lenders, including First Abu Dhabi Bank, Emirates NBD, and Abu Dhabi Commercial Bank, as well as Dubai Islamic Bank and Mashreq, control about 79 percent of the UAE banking system's assets, Moody's said.
Their stronger bottom line was driven by solid operating revenue that more than offset higher costs and a sharp rise in provisions.
The findings come after Fitch Ratings said in March that financial institutions in the Gulf Cooperation Council region face limited short-term credit risk from the Iran war, supported by strong financial buffers and sovereign backing.
"Net profit growth was supported by sound operating revenue, reflecting solid net interest income, sustained fee and commission growth, and robust treasury and trading revenue. These factors more than offset higher operating expenses and increased provisioning charges," said Moody's in the latest report.
Strong operating revenues
Net interest income rose 11 percent year on year to 46.8 billion dirhams. The gain was largely volume-driven, as average interest-earning assets expanded 18 percent amid sustained lending opportunities in the UAE and regional markets.
This growth occurred even as asset yields declined to 6.1 percent from 6.8 percent following rate cuts by the Central Bank of the UAE in the second half of 2025. Lower funding costs helped limit the compression in net interest margins, which narrowed only modestly to 2.6 percent from 2.8 percent.
Non-interest income also performed strongly, climbing 12 percent to 26 billion dirhams. Fee and commission income advanced 18 percent, supported by higher volumes in trade finance, cards, wealth management and transaction banking.
Treasury and trading revenue remained robust as market volatility linked to geopolitical tensions boosted foreign-exchange, derivatives and capital-markets activity.
Non-interest income now accounts for more than 35 percent of aggregate operating income, underscoring the banks' continuing diversification away from traditional spread-based earnings.
Future outlook
According to Moody's, profitability is expected to remain sound for full-year 2026, supported by continued loan growth linked to the multiyear capital expenditure cycle.
Net interest margins should prove relatively resilient, while non-interest income may moderate on softer trade and deal activity.
"Cost efficiency will remain among the strongest globally, but credit costs will stay elevated as banks front-load provisions ahead of asset quality deterioration stemming from the ongoing conflict. Consequently, while earnings will continue to grow, bottom-line profitability ratios are likely to continue to soften through year-end," said Moody's.
Arab News
Please wait...
