• Profitability of top 10 lenders jumps by 28.8 percent year-on-year (YoY) for FY’23, on the back of rising interest rate scenario.
  • As 2024 unfolds, the sector cautiously anticipates a favourable outlook on the back of stable interest rates, declining bad loans, and a robust GDP; rate cuts expected to begin in the second half of FY’24.

Dubai – Leading global professional services firm Alvarez & Marsal (A&M) has released its latest United Arab Emirates  (UAE) Banking Pulse for fiscal year 2023, and it makes good reading. The UAE banking sector has had a positive year with most of the UAE banks showing increasing profitability and higher return ratios. The combined net income for banks increased by 54.1 percent YoY for FY’23 to AED 76.9bn This was primarily due to higher interest income, significant growth in advances, expanded net interest margins, and improved asset quality.

Loans and Advances (L&A) grew by 9.0 percent year-on-year (YoY), at a slower pace than growth in deposit of 13.4 percent YoY. Non-Interest Income (NII) increased by 27.6 percent YoY as Net Interest Margins (NIM) expanded by 36bps YoY to 2.8 percent due to higher benchmark rates. Net income increased 54.2 percent YoY on the back of higher operating income (+17.2 percent QoQ), improved Cost-to-Income ratio (-2.8 percent points YoY) and lower impairment charges (-19.8 percent YoY). Return on Equity (RoE) and Return on Assets (RoA) improved by 5.7 percentage points YoY to 19.9 percent and 0.6 percentage points YoY to 2.2 percent, respectively, in FY’23.

A&M’s UAE Banking Pulse examines data from the 10 largest listed banks in the UAE, comparing the FY’23 results against FY’22 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 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 FY 2023 are as follows:

1. Aggregate deposits for top 10 banks grew at 13.4 percent YoY whereas aggregate loans & advances (L&A) increased by only 9.0 percent YoY in FY’23. Consequently, Loan-to-Deposit-Ratio (LDR) slipped 3.1 percentage points YoY to 74.9 percent.

2. Total operating income increased by 28.8 percent YoY as compared to 17.2 percent YoY in FY’22. The growth in operating income was primarily driven by NII which increased substantially by 27.6 percent YoY. The non-funded income (+31.4 percent YoY) further supported the increase in operating income.

3. NIM expanded by 36bps YoY to 2.8 percent due to higher yield on credit (+4.5 percentage points YoY) to 11.5 percent in FY’23.  Aggregate net interest income (+27.6 percent YoY) grew due to an increase in the Central Bank of the UAE (CBUAE) policy rate (+100bps) during the year. The cost of funds increased by 2.2 percent points YoY to 4.0 percent.

4. Operational cost efficiencies improved on an aggregate level for the UAE banks in FY’23. Cost-to-income (C/I) ratio improved (-2.8 percent points YoY) to 28.7 percent in FY’23. The operating income grew by 28.8 percent YoY and the operating expense grew by 17.2 percent YoY in FY’23.

5. The Cost of Risk (CoR) improved by 25bps YoY to 0.7 percent as banks reported a decline of 19.8 percent YoY in impairment charges in FY’23 to AED 13.7bn.

6. Rising interest rates look set to increase the profitability of UAE banks. Aggregate net income increased by 54.1 percent YoY, as a result the return ratios such as return on equity (ROE) and return on assets (ROA) improved by 5.7 percent points YoY to 19.9 percent and 0.6 percent points YoY to 2.2 percent, respectively, in FY’23.


The table below sets out the key metrics:



FY 2022

FY 2023


Loans and Advances Growth (QoQ)



Deposits Growth (QoQ)




Loan-to-Deposit Ratio (LDR)



Income & Operating Efficiency

Operating Income Growth (QoQ)



Operating Ince / 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: “Our analysis reveals a healthy showing among banks in 2023, with many institutions experiencing an increase in profitability and stronger return on investment metrics; the year, however, ended on a slower 4th quarter.

Looking ahead, as the Central Bank of the UAE continues to align its benchmark rate with that of the US Federal Reserve, holding steady at 5.4 percent, we anticipate a shift in the second half of 2024 when rate reversals are expected to commence. This may present some short-term margin enhancement as deposit costs are likely to reduce relatively faster in response to rate cuts compared to the pace at which asset pricing may adjust. In general, the sentiment is optimistic, though cautious given the geopolitical scenario. Given that the UAE banks are mostly well capitalized, profitable, liquid, and well supported by regulators, we look forward to a stable 2024.”

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.

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