UAE Banks Set for Strong Lending Growth in 2025

 

The banking sector in the United Arab Emirates is expected to see strong lending growth in the year 2025. This bullish trend will primarily be driven by supportive economic policies and easing monetary conditions. Analysts of S&P Global Ratings, including Puneet Tuli, are optimistic that these factors will help banks expand their lending books in support of general economic developments.

During the past three years, UAE's bank deposits increased quite significantly. Growing deposits make lending for banks easy since it builds an effective source to lend both individually and in a business model that will uplift other economic sectors also. These statistics are the necessity of sustenance for a sustainable banking system.

Even as lending is expected to grow, the profitability of banks is likely to decline slightly in 2025. Analysts expect profitability to remain high but not at the same level as in 2023, after which the performance was strong. This is a healthy banking environment, even though banks are changing with the market.

Another encouraging sign for the UAE banks is that the rates for non-performing loans and credit losses are very low. The solid performance of its non-oil sectors helps keep the rates low for such things. This stability will make people confident in their lending practices and must, therefore, take essential steps to foster growth and achieve financial stability.

Furthermore, banks are likely to enhance their capital buffers through strong internal capital generation. This is supported by high profitability and shareholder backing. With dividends generally below 50%, banks can reinvest more into their operations, strengthening their overall financial health.

In summary, the UAE banking sector is on track for robust lending growth in 2025, supported by positive policies and a strong deposit base. Profitability might see a slight dip, but the overall outlook remains strong, with low risks associated with loans. This positive scenario bodes well for the UAE's economic landscape in the coming years.