UAE bank lending slows as regional conflict weighs
Arabian Post Staff -Dubai Lending growth at the UAE’s 10 largest listed banks slowed in the second quarter of 2026 as regional disruption from the US-Iran conflict intensified, while profitability and asset quality remained broadly resilient. Net loans and advances increased 4.2 per cent from the previous quarter, down from about 5.8 per cent in the first three months of the year, according to…
UAE banks experienced a slowdown in lending growth during the second quarter of 2026 due to intensified regional disruption from the US-Iran conflict. Net loans and advances increased by 4.2% compared to the previous quarter, but this was down from 5.8% in the first three months of the year. Deposit growth also slowed to 2.3% from 3.8%.
This led to an increase in the loan-to-deposit ratio to 81.9% from 80.4%, indicating banks were utilizing available deposits more to support credit growth. Despite these challenges, profitability and asset quality remained resilient. Operating income fell 1.2% quarter on quarter to Dh43.9 billion, while non-interest income declined by 6%.
Funding costs rose, pushing the cost-to-income ratio to 27.9% from 27.3%. However, net income still grew 2.7% from the first quarter, thanks to lower credit impairment charges and recoveries. Return on equity and assets both held steady. Asset quality remained stable, with the non-performing loan ratio at 2.3% and coverage ratio at 108.8%.
Capital buffers improved slightly, with the aggregate capital adequacy ratio reaching 16.4%. Liquidity measures, however, weakened, with the liquidity coverage ratio dropping to 134.3% and the eligible liquid asset ratio falling to 18.6%. Despite this, system-wide lending in the UAE expanded by Dh24.7 billion in June alone, showing continued activity across various segments.
Written by urgent.news from Arabian Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
