• Loans and advances reach the highest level in the post COVID-19 period.
  • The interest rates are likely to be at peak and the cycle reversion is expected to begin in H2’24.

Dubai – Leading global professional services firm Alvarez & Marsal (A&M) has released its latest United Arab Emirates (UAE) Banking Pulse for the first quarter of 2024. The report shows that the banking sector witnessed growth in profitability of AED 20.8 billion mainly on the back of non-core income, lower operational costs, and declining impairment charges of 47.9 percent quarter on quarter (QoQ).

With no change in the benchmark interest rates during the quarter, net interest income (NII) declined marginally by 1.1 percent QoQ however, non-core income (+18.9 percent QoQ) increased substantially, growing the total operating income by 4.8 percent QoQ.

Loans and advance (L&A) grew 3.4 percent, reaching the highest level in the post COVID-19 period, while deposits grew at a faster rate of 5.1 percent QoQ.

Return on Equity (RoE) improved by 1.2 percent points QoQ to 20.3 percent and Return on Assets (RoA) improved by 0.1 percent points QoQ to 2.2 percent during the quarter.

A&M’s UAE Banking Pulse examines data from the 10 largest listed banks in the UAE, comparing the Q1’24 results against Q4’23 results. Using independently sourced published market data and 16 different metrics, the report assesses banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital.

The report also offers an overview of the key developments affecting the banking sector in the UAE and further analysis with a segment view of loans & assets, deposit mix and a stage–wise breakdown of the lending book.

The country’s 10 largest listed banks analyzed in A&M’s UAE Banking Pulse are First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank (Mashreq), Abu Dhabi Islamic Bank (ADIB), Commercial Bank of Dubai (CBD), National Bank of Fujairah (NBF), National Bank of Ras Al-Khaimah (RAK) and Sharjah Islamic Bank (SIB).

The prevailing trends identified for Q1 2024 are as follows:

  1. Deposits mobilization continued to outpace credit demand. Aggregate deposits for top 10 UAE banks grew by 5.1 percent QoQ outpacing L&A growth of 3.4 percent QoQ. Consequently, Loan-to-Deposit Ratio (LDR) decreased 1.2 percent points QoQ to 73.8 percent.    
  2. Total operating income increased by 4.8 percent QoQ in Q1’24 as compared to a decline of 0.8 percent QoQ in the previous quarter on the back of non-core income of the banks (+18.9 percent QoQ). Net fees and commission income increased for the quarter by 19.4 percent QoQ, and other operating income increased by 18.5 percent QoQ. Although, NII witnessed a decline of 1.1 percent QoQ.
  1. NIMs contracted with a combined effect of lower LDR and shrinking spreads. Aggregate NIMs contracted 12bps QoQ to 2.7percent for the quarter. Yield on credit decreased for the first time in two years by 56bps QoQ to reach 12.2 percent, whereas cost of funds decreased by 28bps QoQ to 4.4 percent in Q1’24. Most banks reported contraction in NIM during the quarter.
  2. Cost-to-income (C/I) ratio improved substantially by 3.6 percent points QoQ to reach 27.9 percent in Q1’24 – within its average range (after a bump to 31.5 percent in Q4’23). The overall cost efficiency in the UAE banking sector was improved as none of the banks out of the top ten reported a deterioration.
  3. More than half of the top ten banks reported an improvement in cost of risk (CoR). Cost of risk improved by 39bps QoQ to settle at 0.4 percent for Q1’24. Total impairments declined by 47.9 percent QoQ to AED 2.0bn.
  4. Banks in Q1’24 were profitable due to improved cost efficiencies, loan recoveries and non-operational income. Aggregate Return on Equity (RoE) improved by 1.2 percentage points QoQ to 20.3 percentage in Q1’24. This was due to increase in net income by 9.3 percentage QoQ.


The table below sets out the key metrics:



Q4 2023

Q1 2024


Loans and Advances Growth (QoQ)



Deposits Growth (QoQ)




Loan-to-Deposit Ratio (LDR)



Income & Operating Efficiency

Operating Income Growth (QoQ)



Operating Income / Assets



Non-Interest Income / Operating Income



Yield on Credit (YoC)



Cost of Funds (CoF)



Net Interest Margin (NIM)



Cost-to-Income Ratio (C/I)




Coverage Ratio



Cost of Risk (CoR)




Return on Equity (RoE)



Return on Assets (RoA)



Return on Risk-Weighted Assets (RoRWA)




Capital Adequacy Ratio (CAR)



Source: Financial statements, investor presentations, A&M analysis

Mr. Asad Ahmed, A&M Managing Director and Head of Middle East Financial Services commented: “Banks in Q1’24 were profitable due to improved cost efficiencies, lower provisions s and higher non-operational income. Against the backdrop of a static benchmark interest rate, now likely at its peak, the sector has demonstrated ongoing resilience.

Asset quality remains sensitive to the continued high interest rate environment, The Central Bank of the UAE continues to anchor its benchmark rate to the US fed and maintained the bank rate at 5.4 percent. Rate reversal is expected to begin in the second half of the FY’24 – likely in the autumn, and expected to have a gradual impact on NIMs, but not in the short-term.

Barring any regional issues, the sector has reason to remain optimistic as we anticipate continued steady growth in the UAE banking sector."


About Alvarez & Marsal

Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems.

With over 9,000 people providing services across six continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth.

To learn more, visit: AlvarezandMarsal.com.

Seán Lawless                       
Hanover Middle East          
Sandra Sokoloff, Senior Director of Global Public Relations                      
Alvarez & Marsal