Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
UAE banks outperformed their regional peers into the third quarter of 2025, supported by strong earnings delivery, higher non-interest income and expanding capital buffers, according to the latest UAE Banking Pulse report by Alvarez & Marsal (A&M).
The report said UAE banks extended their rally in the stock markets during the period, with share prices up about 30% year-on-year, making the sector one of the best-performing globally.
A&M analysed 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, Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Fujairah (NBF), National Bank of Ras Al Khaimah (RAKBANK) and Sharjah Islamic Bank.
The report said that UAE banks’ share prices rose across the board in Q3 despite global market volatility, with investors responding positively to robust profitability and solid asset-quality trends.
Aggregate market capitalisation for the sector increased by 5% quarter-on-quarter and 31% year-on-year. Mashreq recorded the strongest three-year appreciation at 139%, followed by ADIB at 112%, CBD at 105% and RAKBANK at 97%. Over the past year, ADIB led the sector with a gain of 58%, followed by ADCB at 48%, DIB at 39% and FAB at 29%.
As of Q3 2025, the UAE banks traded at a simple average of 8.5 times price-to-earnings and 1.67 times price-to-tangible-book value. ADIB has the highest P/E ratio of 13.1, followed by ADCB (10.6), DIB (9.0), CBD (8.8) and FAB (8.8).
Banks with the highest price-to-tangible-book ratios were ADIB at 3.3 times, CBD at 1.74, ADCB at 1.69 and DIB at 1.67 times. Emirates NBD has a P/TBV ratio of 1.23, making it an undervalued company and an attractive buy at the stock market.
The report said the aggregate return on equity for the sector improved to 19.6% in Q3 2025, rising by 25 basis points quarter-on-quarter, even though seven of the top ten banks recorded declines. Strong performance by ENBD and ADCB had offset the downside, resulting in an overall uplift in the sector’s return profile, the report said.
ENBD’s RoE increased to 22.5%, up 2.1 percentage points from the previous quarter due to a rebound in net income, which grew by 5.6% after contracting in Q2. ADCB’s RoE reached 17%, a rise of 2.5% quarter-on-quarter, helped by a 20.4% increase in bottom-line earnings. ADIB continued to post the highest RoE in the sector at 27.8%, although this was marginally softer than the previous quarter as net income growth moderated.
Supplementing the equity market performance, A&M highlighted strong balance-sheet expansion in Q3. Aggregate net loans and advances rose 6.5% quarter-on-quarter, outpacing deposit growth of 4.3% and raising the loan-to-deposit ratio to 77.8%. Operating income increased 3% during the quarter, driven by higher net interest income and stronger fee generation. Net income also grew 4.3% quarter-on-quarter due to lower impairment charges and taxes. Cost pressures rose slightly as banks continued to invest in digital and AI-driven transformation, pushing the cost-to-income ratio to 28.1%.
Margins remained steady, with the sector’s net interest margin edging up to 2.45%, supported by stable credit yields despite higher funding costs. Asset quality also improved, with the cost of risk declining to 0.45% as impairment allowances fell and loan growth remained moderate. Return on assets remained firm at 2.1%, indicating consistent profitability across the system.
Commenting on the results, Asad Ahmed, Managing Director and Head of Middle East Financial Services at Alvarez & Marsal, said the third quarter reflected the underlying strength of the UAE banking system, noting that banks “continued to demonstrate solid momentum, supported by improving asset quality, stable margins and strong capital positions.” He said the sector’s earnings resilience and attractive valuations continued to support investor confidence. Ahmed added that forward-looking themes emerging at Abu Dhabi Finance Week underscored Abu Dhabi’s growing role as a global financial hub, pointing to expanding opportunities for banks as regional capital flows deepen.
