The first quarter of 2025 has brought strong signs of growth and resilience for the United Arab Emirates’ banking sector. According to a new report analyzing the country’s top ten listed banks, the year began with a notable boost in profits, improved operational efficiency, and a renewed wave of mergers and acquisitions.

This encouraging start underscores the strength and adaptability of the sector, especially in the face of evolving global economic challenges.

Strong Financial Gains Across the Board

Net income across the top banks grew by 8.4% compared to the previous quarter, reaching AED 22.2 billion. This growth was driven in large part by a sharp 18% jump in income from fees and commissions, reflecting a healthy diversification beyond traditional interest-based revenue.

Banks also saw key profitability metrics rise. Return on equity (ROE) climbed to 18.6%, while return on assets (ROA) reached 2.1%, both of which signal improved efficiency and stronger investor returns.

Lending Activity Picks Up

Lending saw noticeable momentum in the first quarter. Net loans and advances increased by 3.6% from the previous quarter, mainly fueled by corporate and wholesale lending, which rose 5.1%. Meanwhile, deposit growth outpaced lending, rising by 5.8%, supported by a strong inflow into current and savings accounts.

As a result, the loan-to-deposit ratio dropped to 74.7%, indicating better liquidity levels and more financial flexibility for banks going forward.

Operational Efficiency Hits a New High

UAE banks continued to benefit from digital transformation and tighter cost management. Operating expenses dropped by 7.8% quarter-on-quarter, pushing the cost-to-income ratio down to 28.2%—the lowest it has been in a year.

This improved efficiency means banks are becoming more agile and profitable, even without significant growth in top-line revenue.

Asset Quality Strengthens

Risk levels are also showing improvement. The cost of risk fell by 45 basis points to 0.29%, while asset coverage climbed to 110.5%. Non-performing loans (NPLs) dropped to 3.2%, thanks to strong recoveries and healthier loan portfolios.

There was also a 3.9% increase in Stage 1 loans—those considered low-risk—alongside a decline in higher-risk exposures, indicating a shift toward safer, more stable lending practices.

Expert View: A Sector Adapting with Confidence

Asad Ahmed, Managing Director of Financial Services at Alvarez & Marsal, commented that UAE banks have made a confident and steady start to the year. He noted that the sector’s strong Q1 performance—especially in loan and deposit growth, cost discipline, and asset quality—reflects its ability to adapt and thrive in a shifting economic environment.

The Top 10 Banks in Focus

The report reviewed performance from the leading institutions in the country, including:

• First Abu Dhabi Bank

• Emirates NBD

• Abu Dhabi Commercial Bank

• Dubai Islamic Bank

• Mashreq Bank

• Abu Dhabi Islamic Bank

• Commercial Bank of Dubai

• National Bank of Fujairah

• RAKBANK

• Sharjah Islamic Bank

With profits up, risks down, and operations running more efficiently, UAE banks are clearly on a strong trajectory in 2025. Their solid start reflects not just smart management but a broader national strategy of financial innovation, digital transformation, and economic resilience. If the first quarter is any indication, the rest of the year looks promising for the country’s banking sector.