Dubai — The UAE's big banks are expected to report improved profits in 2025, but returns on assets will continue to remain under pressure, Moody's Ratings has warned.
The four largest lenders, First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, and Dubai Islamic Bank, accounted for a collective net profit of Dh32 billion during the first half of 2025, an increase of 6 percent from a year earlier. The increase was boosted by strong non-funded income and consistent loan demand.
In spite of the profit increase, overall return on assets fell to 1.8 percent from 2.0 percent in the previous year. Moody's anticipates that it will fall further this year.
"Going forward, we anticipate UAE banks' 2025 net profits to continue to grow but returns on assets will stay under pressure from lower interest rates, higher provisioning fees and rising tax burden," Badis Shubailat, Assistant Vice President-Analyst at Moody's Ratings, stated.
The UAE's new corporate taxation has greatly boosted banks' effective tax rates. The four largest lenders paid Dh6.6 billion in the first half in taxes, or 17 percent of pre-tax profit, nearly twice the effective rate prior to the charge.
Loan-loss provisions are again growing, lifting the cost of risk, and digital transformation spending keeps keeping operating expenses rising.
Moody’s noted that strong credit demand and fee income will support profitability but warned that banks will struggle to deliver the same level of returns on assets as in past years.
