UAE Banks: The key things we learned from 2Q26

Research evidence excerpt

UAE Banks: The key things we learned from 2Q26

Update

July 24, 2026 08:56 AM GMT

Morgan Stanley & Co. International plc (DIFC Branch)+MEEMEA - Banks & Fintech | Europe Shabbir Malik

Equity Analyst

UAE Banks: The key things we Shabbir.Malik@morganstanley.com +971 4 709-7057

EEMEA - Banks & Fintech

Europe

Industry View In-Linelearned from 2Q26

UAE banks delivered higher earnings, supported by strong loan

growth and non-interest income and benign asset quality.

Funding costs are rising and deposit competition is picking up,

but guidance remains intact and Abu Dhabi’s capex cycle

supports a constructive multi-year loan growth outlook.

Funding cost pressure is evident. Funding-cost pressure is increasingly evident in

banks’ NIMs and loan-to-deposit ratios. While we do not view funding availability as

a binding constraint, competition for deposits is intensifying. Deposit growth is also

becoming more skewed towards higher-cost time deposits rather than CASA,

creating a less favourable funding mix.

Idiosyncratic loan growth trends: ADCB's loan growth was led by international

(international: +12% QoQ overall: +5%). Management said that the international

loan growth is primarily a timing effect, not a structural shift. ENBD's consolidated

RBL this quarter (which added 6% to its loan book), but the underlying growth ex

RBL was strong in retail (+5%) and Deniz (+6%). FAB saw a contraction in the loan

book, as it focused on optimising profitability and exiting sub-optimal relationships.

Abu Dhabi's "Capex supercycle" likely a broad-based multi-year theme: Abu

Dhabi banks' expressed confidence in their loan pipeline in light of Abu Dhabi's capex

projects. ADCB broke out the capex pipeline into three themes: hydrocarbons, non-

oil economy, and supply chain diversification.