BATOOL GHAITH (Abu Dhabi)

Emirates NBD and Mashreq ranked strongly across several key performance indicators in the second quarter of 2026, while Abu Dhabi Islamic Bank also stood out among mid-sized lenders, according to Alvarez and Marsal’s latest UAE Banking Pulse.

The report, which analyses the country’s 10 largest listed banks by assets, found that UAE banks continued to expand their balance sheets while maintaining resilient asset quality and solid capital buffers, although higher funding and operating costs continued to pressure margins.

Across the sector, net loans and advances grew 4.2% quarter-on-quarter, while deposits increased 2.3%, pushing the aggregate loan-to-deposit ratio to 81.9% from 80.4% in the previous quarter.

Dubai Banks Show Strong Growth and Returns

Emirates NBD recorded some of the strongest lending momentum among the 10 banks, with net loan growth of 10.1% during the quarter and deposits rising 7.5%.

The bank reported a net interest margin of 3.19%, return on equity of 20.3% and a non-performing loan ratio of 2.1%.

Mashreq also ranked strongly across several indicators, deposits increased 8.1% quarter-on-quarter, while the bank recorded return on equity of 21.9% and one of the lowest NPL ratios among the group at 1.2%.

Meanwhile, Dubai Islamic Bank recorded loan growth of 3.8% and deposit growth of 1.5%, with a 2.23% net interest margin and 16.2% return on equity. Its NPL ratio stood at 2.4%.

Abu Dhabi Lenders Take Different Approaches

First Abu Dhabi Bank remained the largest lender in the study by assets, at Dh1.409 trillion, but took a more cautious approach to balance-sheet expansion during the quarter.

Its net loans declined 1% quarter-on-quarter and deposits fell 2.1%, while return on equity stood at 17.1%.

Despite slower balance-sheet growth, FAB remained the sector benchmark for cost efficiency, recording a cost-to-income ratio of 21%, the lowest among the 10 banks in the report. 

Abu Dhabi Commercial Bank recorded net loan growth of 4.4% and deposit growth of 0.7%, while its NPL ratio stood at 1.8%, among the lowest in the group.

Abu Dhabi Islamic Bank posted stronger growth, with net loans increasing 6.4% and deposits rising 2.6%. The bank reported the highest return on equity among the 10 lenders at 27.9%.

The report also identified National Bank of Fujairah as an outperformer within the small-cap peer group, noting its focus on preserving margins through cost discipline and its strong capital adequacy position.

At the sector level, aggregate net income increased 2.7% quarter-on-quarter even as operating income fell 1.2% to Dh43.9 billion.

Lower credit impairment charges were a major contributor to earnings growth. The report said impairments fell 35.3% during the quarter, helping offset weaker operating income.

Net interest margin slipped three basis points to 2.34%, as higher funding costs outweighed the improvement in credit yields.

The sector’s cost of funds rose to 3.6% from 3.4%, while yield on credit increased to 9.6%. Return on equity improved to 18.9%, while return on assets remained unchanged at 2%.

Asset quality remained broadly stable, with the average NPL ratio holding at 2.3%. The provision coverage ratio eased to 108.8% from 110%, while the cost of risk improved to 0.35% from 0.56%.

Alvarez and Marsal said the improvement in credit costs was driven mainly by lower provisions at FAB, ENBD, ADCB, DIB and Mashreq rather than a significant structural improvement in underlying asset quality.

Capital levels also remained strong, with the aggregate capital adequacy ratio increasing to 16.4% from 16.2%.

Liquidity measures softened during the quarter. The liquidity coverage ratio for systemically important banks fell to 134.3% from 141.6%, while the eligible liquid asset ratio among the other banks declined to 18.6% from 20%. Both remained above regulatory requirements.

The report also highlighted continued investment in digitalisation and artificial intelligence.

FAB reported around a 20% productivity uplift and reductions in manual effort of up to 70–80%, while ENBD is scaling more than 50 AI initiatives.

DIB said 83% of new current and savings account customers were onboarded digitally, while ADIB plans to expand the use of generative AI and advanced analytics.