UAE banking sector assets hit record Dhs4.1tn in 2023

The total assets of banks operating in the UAE rose by 11 per cent year-on-year (YoY) to a record Dhs4.1tn in 2023, the Central Bank of the UAE (CBUAE) said in a report, as the Gulf state’s banking sector is poised for further growth and recovery in 2024.

Quarterly, the banks’ total assets increased by 3.1 per cent quarter-on-quarter in Q4 2023.

Similarly, total deposits of resident and non-resident customers with UAE banks rose by 4.2 per cent QoQ and 13.5 per cent YoY to reach Dhs2.5tn at the end of December 2023.

Moody’s said banks in the Emirates are predominantly funded by low-cost, sticky deposits.

“Customer deposits in 2023 made up 78 per cent of UAE banks’ funding base,” the rating agency said in a report while noting that a healthy 74 per cent net loans to deposits ratio in 2023 indicates that the country’s banking system does not structurally rely on market funding for their lending activities.

CBUAE said the reserves of banks operating in the Gulf state reached Dhs88.7bn in Q4 2023, up 5.2 per cent QoQ. The total capital adequacy ratio stood at 17.9 per cent at the end of December 2023, remaining well above the 13 per cent capital adequacy ratio required by the central bank.

The apex lender maintained a stable and efficient banking system by providing efficient and effective central banking services.

The country’s banking sector registered record levels of growth in assets, credit, deposits and investments while maintaining strong levels of capital efficiency to ensure compliance with governance and risk management standards.

Foreign assets of the UAE central bank

The central bank’s foreign assets increased by 16.7 per cent QoQ to reach Dhs681.2bn at the end of Q4 2023. The growth was attributed to the quarterly expansions in current account balances and deposits with banks abroad by 27 per cent to Dhs94.4bn and a 10.6 per cent increase in foreign securities to Dhs17.9bn.

Money Supply M1, which comprises currency in circulation outside banks and monetary deposits, jumped 4.2 per cent QoQ in the last quarter of 2023. On an annual basis, it jumped 12.4 per cent to reach Dhs829.3bn in December.

Liquid assets in the UAE banking sector soared to Dhs742bn in Q4 2023, a 29 per cent YoY increase or Dhs165.7bn from Dhs576.3bn for the same period a year ago.

The increase in liquid assets is a positive sign for the UAE banking sector, as it indicates that banks have sufficient assets to meet their short-term obligations.

Moody’s changed the outlook for the UAE banking system to positive from stable, citing a “resilient and dynamic non-oil economy” that will continue to present favourable operating conditions.

Read: UAE banks reap the benefits of an economic boom