Today's Edition
KHALED AL KHAWALDEH (ABU DHABI)
The UAE's banking sector is set for strong performance in 2025, backed by strong non-oil growth, stable oil prices, large infrastructure pipelines and broadly robust capital level across the region, according to recent reports from global consultancy EY.
The EY GCC Banking Sector Outlook 2024 report forecasted a continuation of 2024 trends which saw "rising lending volumes, increased fee income, stable margins and effective cost management", across the GCC region.
"As we go into the first quarter of 2025, the GCC banking industry should remain strong due to considerable capital cushions, healthy asset quality indicators and adequate profitability," Mayur Pau, EY MENA Financial Services Leader, said.
"Resilient economies, the region's economic diversification efforts and enabling policies will support higher consumption and investment, further boosting the sector's performance."
EY anticipates that the banks in the UAE will continue to grow their lending activities bolstered by "relaxed monetary policies and a favourable economic environment". The report also highlighted that deposit growth consistently exceeded lending at UAE banks, which, it said, was driven by strong performance in both corporate and retail segments and was indicative of a robust sector.
EY also forecasts that banks would continue to increase their lending as interest rates come down in line with the US Federal Reserve's cuts.
"The upcoming financial year looks to be a transformative period, with advancements in technology, shifts in consumer behaviour and regulatory changes shaping the future of banking," Pau added.
Ultimately, the strong performance of the banks is underlaid by the robust growth in the overall economy. A recent report by the Institute of Chartered Accountants in England and Wales (ICAEW) predicted the Middle East's GDP to grow by 3.3% and be largely "out of the firing line" of trade disputes.
ICAEW singled out the UAE's particularly strong trade, broadened by the extensive CEPA programme which is set to continue expanding in 2025. Moreover, it highlighted the healthy budget surplus in the UAE, which it said would allow the country to continue to make and fund large infrastructure projects.
"The outlook for the non-oil sectors is for another year of strong expansion and we expect demand conditions in the region to remain supportive of activity. We see growth in Saudi Arabia and the UAE outperforming again, with expansion of 5.8% and 4.8%, respectively, thanks to a strong pipeline of infrastructure projects and private-sector development," the report said.
