Moody’s has revised its outlook for UAE banks from stable to positive, even as the sector continues to face low profitability and persistent geopolitical headwinds. The upgrade reflects the UAE’s ongoing economic diversification efforts and structural reforms within the banking system.
“We see operating conditions quite robust in the UAE, which will continue to create strong growth opportunities that banks will be able to respond to effectively, thanks to ample liquidity resources,” said Francesca Paolino, analyst of Moody’s Ratings.
According to Paolino and the ratings agency, UAE banks will maintain robust liquidity, benefiting from economic buoyancy, structural reforms and a steady growth in the resident population that will drive deposit inflows. She also highlighted improving asset quality with UAE banks, despite “some pockets of resilience on the real estate front, notwithstanding the anticipated price softening.”
Moody’s reports that an easing in monetary policy will likely see UAE banks face net interest margin compression that will see profitability marginally soften but remain solid. It further retained its stable outlook for most GCC banks, despite low oil prices.
“The current levels remain very much supportive of business confidence, which is very important for bank activities across the region. Inflation readings have been and will remain moderate, very much aided by government subsidies and robust fiscal firepower. As governments across the region continue to advance vast hydrocarbon diversification agendas, structural reforms will continue to sustain growth in the non-oil economic space,” said Badis Shubailat, VP-Senior Analyst, Moody’s Ratings.
“From the remaining GCC nations, Oman is the only country to see its rating shift from ‘positive’ to ‘stable,’ with Moody’s attributing the change to ‘solid operating conditions’ that underpin improving asset quality,” the official concluded.
Talking about UAE’s banking sector, things looked a bit better in 2025, low profitability and persistent geopolitical headwinds, as assets continued to record strong growth, rising by more than AED780 billion over the year to reach approximately AED5.34 trillion (USD 1.45 trillion) at the end of December, compared to around AED4.56 trillion (USD 1.24 trillion) in the same period in 2024, stated the Central Bank of the UAE (CBUAE). Also, the gross banks’ assets increased by 1.7% from AED5.252 trillion at the end of November 2025 to AED5.34 trillion at the end of December 2025.
The central bank’s latest report revealed that gross credit increased by 1.5% from AED2.533 trillion at the end of November 2025 to AED2.5703 trillion at the end of December 2025. Two-thirds of total credit growth was supported by growth of credit in foreign currency by AED25.8 billion, and the rest by an increase in domestic credit by AED11.6 billion.
“The growth in domestic credit was driven by an increase in credit to the private sector by 0.6% and credit to the Government-Related Entities (GREs) by 1.8%, followed by growth of credit to the OFC by 10.9%,” reported Economy Middle East.
UAE banks’ deposits also increased by 2.2%, from AED3.2366 trillion at the end of November 2025 to AED3.307 trillion at the end of December 2025. The driving factor was the 1.3% growth in resident deposits, reaching AED3.009 trillion and non-resident deposits by 12.2%, reaching AED297.8 billion.