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• Lending growth accelerated 5.8% Quarter-on-Quarter (QoQ), while deposits grew by 3.8% QoQ 
• Operating income grew by 7.7% QoQ, while cost-to-income (C/I) ratio improved to 27.3% due to disciplined cost management, technology- led productivity gains and strong operating income
• Asset quality remained resilient as NPL ratio declined to 2.3% 
• NIM declined marginally by 9bps QoQ to 2.37%, while RoE and ROA increased to 18.7% and 2.0%, respectively

Dubai, United Arab Emirates – 1^st July 2026 – Alvarez & Marsal (A&M), the global professional services firm known for its senior-led, operator-driven approach, has released its latest edition of the United Arab Emirates (UAE) Banking Pulse, analyzing the Q1 2026 performance of the country’s ten largest listed banks. The quarter was marked by strong balance sheet growth, improved asset quality, and resilient profitability. However, geopolitical tensions that intensified toward the end of the quarter have increased uncertainty around lending growth, provisioning requirements, and asset quality heading into Q2 2026.

Lending growth continued to outpace deposit mobilization. Net loans and advances (L&A) grew by 5.8% QoQ, while aggregate deposits grew by 3.8% QoQ. Aggregate operating income increased by 7.7% QoQ to AED 44.4bn, driven by strong 23.9% QoQ growth in non-interest income, which more than offset the modest 0.3% QoQ decline in net interest income following recent interest rate cuts.

Sector NIM eased to 2.37% in Q1 2026, as the decline in asset yields outpaced the moderation in funding costs. YoC declined by 84bps QoQ to 9.5%, while CoF decreased by 35bps QoQ to 3.4%. However, profitability of banks remained resilient, with RoE increasing to 18.7% and RoA rose to 2.0%, as aggregate net income of banks increased by 11.1% QoQ.

Asset quality remained resilient as NPL ratio declined to 2.3%, while the coverage ratio strengthened to 110.0%. CoR improved to 0.56% in Q1 2026; however, the improvement was largely driven by ENBD recoveries. 

The report analyzes the top ten UAE banks by asset size: First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank (MASQ), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Ras Al-Khaimah (RAK), Sharjah Islamic Bank (SIB), and National Bank of Fujairah (NBF).

Mr. Sam Gidoomal, Managing Director and Head of Middle East Financial Services, commented: “UAE banks delivered a strong performance during Q1 2026 with growing balance sheets, improving asset quality, and demonstrating resilient profitability. However, the geopolitical tensions escalated toward the end of the quarter have increased concerns around provisioning and asset quality going into Q2 2026. We would expect to see some evidence of the impact of the disruption flowing through in Q2 and beyond.”

Prevailing Trends Identified for Q1 2026

• Credit growth outpaced deposit mobilization. Net L&A increased by 5.8% QoQ, while deposits rose by 3.8% QoQ, led to increase in the LDR to 80.4% from 78.9% in the previous quarter.
• Robust operating income growth. Operating income grew by 7.7% QoQ, supported by non-interest income which increased by 23.9% QoQ, while net interest income declined by 0.3% QoQ.
• Cost efficiency improved due to disciplined cost management, and technology- led productivity gains. The C/I ratio improved by 1.7% QoQ to 27.3%.
• NIM declined marginally following recent rate cuts; however, profitability remained resilient. NIM eased by 9bps QoQ to 2.37%, while RoE and RoA increased by 1.8% and 13bps QoQ to 18.7% and 2.0%, respectively.
• Asset quality metrics improved. NPL ratio declined by 11bps QoQ to 2.3%, while CoR improved by 6bps QoQ to 0.56%.
• Bank valuation remained appealing. As of Q1 2026, UAE banks trade at 7.9x P/E and 1.6x P/TBV. Despite de-rating linked to geopolitical unrest, the sector remains attractively positioned.

Looking Ahead: Q2 2026

• Funding and liquidity management will remain a key priority, as banks focus on maintaining deposit growth and funding stability amid potential deposit outflow risk.
• Lending momentum will be closely monitored to assess whether credit demand remains resilient amid heightened regional uncertainty.
• The trajectory of asset quality and provisioning will be an important watchpoint, as geopolitical uncertainty and the effectiveness of CBUAE support measures may shape future impairment levels.
• Revenue diversification will become increasingly important, as banks seek to offset margin pressure through higher fee income, trading income, and other non-interest revenue streams.
• Digital and AI-led transformation will remain a key focus area, with banks increasingly leveraging advanced analytics, automation, and agentic AI to enhance productivity, risk management, and customer experience.
• Sustainable finance is expected to gain momentum, supported by banks' long-term ESG commitments.

OVERVIEW

Source: Financial statements, Investor presentations, Pillar III disclosures, A&M analysis

Note:¹ Under the applicable regulatory framework, Domestic Systemically Important Banks (D-SIBs), including FAB, ENBD, ADCB, DIB, and MASQ, report the LCR, while the remaining banks, including ADIB, CBD, RAK, SIB, and NBF, disclose the ELAR

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ENDS 

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