September 8, 2025 | Dubai, UAE: In the GCC banking sector, UAE banks outperformed their regional counterparts in the second quarter of 2025, leading not only by record revenue but also by lending growth across the Gulf Cooperation Council (GCC) Banking Sector, as per the latest study from Kamco Invest. These results underline the resilience and calculated expansion of the UAE’s financial institutions, propelled by the use of various income sources, cautious lending, and solid economic flow.
Strong Revenue Growth and Lending Expansion in the GCC Banking Sector
The GCC banking sector in the UAE achieved a 5.3 per cent revenue increase from the last quarter (q-o-q), totaling $13.3 billion being the highest in the whole GCC Banking Sector. The rise of 10.1 per cent was the main driver for the total growth of non-interest income, which was largely attributable to the expansion of fee-based activities and income diversification. The yield of net interest to total assets also went up by 1.8 per cent to $7.6 billion, on the back of a 4.6 per cent q-o-q increase in gross loans, which elevated by $29.8 billion to $672.8 billion at the end of Q2.
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The mode of credit growth was by and large, and all the sectors that showed considerable changes in personal loans, property development, retail and wholesale trade, construction, and manufacturing were highlighted as such. The Central Bank of the UAE’s survey on credit sentiment reported steady demand from individuals and organizations, thus indicating increasing household incomes and an encouraging investment atmosphere.
Customer deposits grew to $941.0 billion with an increase of 4.1 per cent q-o-q, being the highest in the GCC Banking Sector, at the same time, the UAE upheld the lowest loan-to-deposit ratio in the region at 67.9 per cent. This is proof of the excellent liquidity and wise lending strategies that have been the major players in the UAE’s banking sector landscape improvement.
Operational Efficiency and Profitability Resilience
UAE banks managed to bring down their operating expenses by 6.1 per cent, i.e., the expenses were falling to $4.6 billion, which was the biggest step in the GCC Banking Sector. The main driver of the improved efficiency was the decreasing the cost-to- income ratio to 38.0 per cent, 70 basis points lower compared to the last quarter.
While there was a rise in loan impairment from $0.39 billion to $0.50 billion, which led to the cost of risk increasing to 0.50 per cent, the analysts observed that this level is still below the average over time, basing on which they infer that asset quality remains steady amid the cautiousness by provisioning. Notwithstanding the impairments’ increase, UAE banks did their best and thus, ensured that the return on equity (ROE) was the highest among the GCC at 16.4 per cent, indicating that the financial fundamentals were strong, and the financial management was disciplined.
The sector was still able to keep the highest net interest margin (NIM) in the GCC Banking Sector at 3.26 per cent, although it had slightly fallen from 3.34 per cent in Q1 as a result of the adjustments that were made to the rates in the region.
According to the report, the banks in UAE are the main contributors to the excellent financial results of the region. Their ability to manage growth alongside risk, and also with a diversified income structure, sets them in a very strong position for the next few quarters. The banking industry in the UAE is expected to continue its upward trend in the GCC Banking Sector as non-oil sectors are growing and there is a robust project pipeline ahead.
Analysts from Kamco Invest are of the view that the banking sector has achieved this success due to strategic lending practices, operational efficiency improvement, and their ability to adjust to changing market conditions. Even if there are small issues, for example, rising provisions, the GCC banking sector is still going on to lead the way to the highest level of profitability and setting of new standards for innovation in the region.
Though the hydrocarbons-have-gone global scenario shudders the GCC economies, the UAE banks seem to be unaffected and are even going ahead. Banks are not only raising revenues, but they are also increasing lending and managing liquidity efficiently. The accomplishments they have achieved in the second quarter of 2025 are a reflection of their most resolute pledge to the wider UAE vision of economic diversification and financial sustainability.
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