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- Operating income increases 3.0% QoQ; cost-to-income ratio rises to 28.1% amid higher technology investment.
- Asset quality remains resilient as cost of risk improves to 0.45%
Sector profitability holds firm, with RoE rising to 19.6% and NIM stable at 2.45%.
Dubai – Leading global professional services firm Alvarez & Marsal (A&M) has released its latest edition of the United Arab Emirates (UAE) Banking Pulse, analyzing the Q3 performance of the country’s ten largest listed banks. The quarter was marked by strong balance sheet expansion, continued earnings resilience, and stable margins despite a shifting interest rate environment.
Aggregate net loans and advances (L&A) increased by 6.5% QoQ, outpacing deposit growth of 4.3% QoQ, resulting in a 161bps rise in the loan-to-deposit ratio (LDR) to 77.8%. Operating income grew 3.0% QoQ to AED 41.9 billion, supported by higher net interest income (NII) and fee revenue, partially offset by a decline in other operating income. Net income increased 4.3% QoQ, driven by lower impairment allowances and taxes. The cost-to-income (C/I) ratio rose 87bps to 28.1%, reflecting increased investment in digital transformation and AI-led initiatives across the banking sector.
Margins remained broadly stable despite interest rate cuts during the quarter. The aggregate net interest margin (NIM) edged up 2bps to 2.45%, as steady yield on credit (YoC) and rising funding costs offset narrower spreads. Spreads declined 9bps QoQ, while YoC held at 10.9% and cost of funds (CoF) rose 11bps to 4.0%.
Asset quality remained resilient. The cost of risk (CoR) improved 6bps QoQ to 0.45%, supported by moderate loan growth and a decline in impairment charges. Overall profitability remained strong, with return on equity (RoE) increasing to 19.6% and return on assets (RoA) remaining steady at 2.1%.
The report analyzes 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 (MASQ), 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).
Mr. Sam Gidoomal, Managing Director and Head of Middle East Financial Services, commented: “UAE banks continued to demonstrate strong earnings momentum in Q3 2025, underpinned by healthy credit expansion, stable margins, and improving asset quality. Despite a lower interest rate backdrop, the sector remains well-positioned, supported by robust macroeconomic fundamentals and banks’ increasing focus on digital and operational transformation. Investor confidence remains strong, reflected in healthy valuation multiples and sustained demand for bank equity.”
Prevailing Trends Identified for Q3 2025
- Credit growth accelerated, continuing to outpace deposits. Net loans and advances increased 6.5% QoQ, while deposits rose 4.3% QoQ, leading to a 161-basis-point increase in the loan-to-deposit ratio (LDR) to 77.8%.
- Operating income rose as NII and fee revenue strengthened. Aggregate operating income grew 3.0% QoQ, supported by 5.0% QoQ growth in NII and 7.3% QoQ growth in fee income, partially offset by lower other operating income.
- Net interest margin (NIM) remained stable at 2.45%. Sector-wide NIM edged up 2bps QoQ, despite narrower spreads and higher funding costs. YoC remained steady at 10.9%, while CoF increased 11bps to 4.0%.
- Cost efficiency softened as banks invested in digital transformation. The C/I ratio increased 87bps QoQ to 28.1%, driven by higher expenses related to digital and AI-led modernization initiatives. NBF and ADCB recorded the largest rises in C/I ratios.
- Risk costs improved, supported by resilient asset quality. CoR declined 6bps QoQ to 0.45%, as impairment allowances fell 6.9% to AED 2.7bn. Six of the top ten banks reported improvement in CoR, led by NBF.
- Profitability remained solid, underpinned by lower impairments and stable margins. RoE improved 25bps to 19.6%, while RoA remained steady at 2.1%.
- Valuations remain supportive, with several banks trading above sector averages. UAE banks traded at an average P/B of 1.6x, led by ADIB at 3.0x, followed by CBD (1.8x) and NBF (1.7x). The sector’s aggregate dividend yield stood at 5.0%, with MASQ offering the highest yield at 8.7%.
OVERVIEW
The table below sets out the key metrics:
| CATEGORY | METRIC | Q2 2025 | Q3 2025 |
| Size | Loans and Advances Growth (QoQ) | 5.0% | 6.5% |
| Deposits Growth (QoQ) | 2.8% | 4.3% | |
| Liquidity | Loan-to-Deposit Ratio (LDR) | 76.2% | 77.8% |
| Income & Operating Efficiency | Operating Income Growth (QoQ) | 5.0% | 3.0% |
| Operating Income / Assets | 3.7% | 3.7% | |
| Non-Interest Income / Operating Income | 38.0% | 36.8% | |
| Yield on Credit (YoC) | 10.9% | 10.9% | |
| Cost of Funds (CoF) | 3.9% | 4.0% | |
| Net Interest Margin (NIM) | 2.43% | 2.45% | |
| Cost-to-Income Ratio (C/I) | 27.2% | 28.1% | |
| Risk | Coverage Ratio | 111.1% | 115.2% |
| Cost of Risk (CoR) | 0.51% | 0.45% | |
| Profitability | Return on Equity (RoE) | 19.3% | 19.6% |
| Return on Assets (RoA) | 2.1% | 2.1% | |
| Return on Risk-Weighted Assets (RoRWA) | 3.2% | 3.2% | |
| Capital | Capital Adequacy Ratio (CAR) | 15.6% | 16.6% |
Source: Financial statements, investor presentations, A&M analysis
Methodology:
Alvarez & Marsal’s UAE Banking Pulse examines the quarterly performance of the ten largest listed banks in the UAE, based on total assets. The Q3 2025 edition compares key performance indicators against Q2 2025 results, offering insights into how momentum and metrics evolved throughout the year. The Q2 2025 figures presented in this report differ from those published in the UAE Pulse Q2 release due to reclassification of some line items and subsequent calculation amendments. The revised data have been incorporated into all comparative assessments in this report to ensure accuracy and period-to-period consistency.
The analysis is based on 16 distinct metrics grouped into five performance categories: size, liquidity, income & efficiency, risk, and profitability. These include growth in loans and deposits, cost-to-income ratios, yield on credit, net interest margins, cost of risk, and return ratios. All data is sourced from publicly available financial statements and investor presentations.
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).
This report also incorporates qualitative developments including M&A activity, digital transformation initiatives, and regulatory updates that shape the strategic landscape for UAE banks.
About Alvarez & Marsal
Founded in 1983, Alvarez & Marsal is a leading global professional services firm. Renowned for its leadership, action and results, Alvarez & Marsal provides advisory, business performance improvement and turnaround management services, delivering practical solutions to address clients' unique challenges. With a world-wide network of experienced operators, world-class consultants, former regulators and industry authorities, Alvarez & Marsal helps corporates, boards, private equity firms, law firms and government agencies drive transformation, mitigate risk and unlock value at every stage of growth.
To learn more, visit: AlvarezandMarsal.com.
