MAYS IBRAHIM (ABU DHABI)
The UAE's largest banks delivered robust first-quarter results for 2026, with double-digit profit growth and improving asset quality, according to a new report by Alvarez & Marsal (A&M).
Net income across the country's top 10 listed banks rose 11.1% quarter-on-quarter, driven by surging non-interest income and disciplined cost management, the consultancy's latest UAE Banking Pulse showed.
Return on equity climbed to 18.7% from 16.9% in Q4 2025, while the cost-to-income ratio improved meaningfully, falling to 27.3% in Q1 2026 from 29.0% in the previous quarter.
Loan books expanded 5.8% quarter-on-quarter, nearly double the pace of deposit growth at 3.8%. The expansion was led by corporate and wholesale lending, which jumped 6.5%, while retail portfolios grew 3.6%.
First Abu Dhabi Bank and Emirates NBD, the country's two largest lenders, reported loan growth of 8.3% and 7.1% respectively.
Net interest margins fell to 2.37% from 2.47% in the previous quarter, as the impact of three interest rate cuts between September and December 2025 filtered through to asset yields.
Banks have offset some of the pressure through diversified revenue streams. Non-interest income surged 23.9% quarter-on-quarter, with fee and commission income up 16.5%.
“The quarter demonstrated the sector's ability to maintain earnings resilience through diversified revenue generation and disciplined cost management,” the report noted.
Non-performing loan ratios fell to 2.3%, down from 2.4% in the fourth quarter, while coverage ratios strengthened to 110%.
Stage 1 loans – the healthiest category under international accounting standards – grew 5.9% and now represent 93.9% of loan portfolios.
The Central Bank of the UAE (CBUAE) had introduced a five-pillar resilience package in March, as regional tensions escalated, including access to foreign exchange reserves and temporary relations of liquidity requirements.
The regulator said that Dh6.2 billion in relief was extended to more than 65,000 customers through loan deferrals, fee waivers, and targeted support for priority sectors.
The report also highlighted accelerating technology adoption across the sector. First Abu Dhabi Bank reported productivity gains of up to 20% through enterprise-wide deployment of “Agentic AI.” Emirates NBD has scaled more than 50 AI initiatives and integrated 187 application programming interfaces.
Mashreq Bank's AI chatbot now resolves 89% of customer queries across 120 banking use cases without human intervention.
Abu Dhabi Commercial Bank reduced staff costs by 10.9% quarter-on-quarter, which it attributed partly to embedding AI within employee workflows.