Total deposits of resident and non-resident customers with UAE banks rose by 13.5 per cent YoY to reach Dhs2.5tn
In 2023, the Central Bank of the UAE reported that the total assets of banks operating in the UAE reached a record Dhs4.1tn, an 11 per cent increase year over year (YoY). The banking sector in the Gulf state is positioned for further growth and recovery in 2024. Quarterly, the total assets of banks increased by 3.1 per cent quarter-on-quarter in Q4 2023.
Additionally, total deposits of resident and non-resident customers with UAE banks surged by 4.2 per cent quarter-on-quarter (QoQ) and 13.5 per cent YoY to Dhs2.5tn by the end of December 2023.
Moody’s noted that UAE banks primarily rely on low-cost, sticky deposits for funding, constituting 78 per cent of their funding base in 2023. Furthermore, a healthy 74 per cent net loans to deposits ratio indicates that the banking system in the country does not structurally depend on market funding for lending activities.
UAE Central Bank reported that reserves of banks operating in the Gulf state reached Dhs88.7bn in Q4 2023, marking a 5.2 per cent increase QoQ. The total capital adequacy ratio remained strong at 17.9 per cent by the end of December 2023, well above the 13 per cent requirement set by the central bank.
The central bank’s foreign assets increased by 16.7 per cent QoQ to Dhs681.2bn by the end of Q4 2023. This growth was attributed to quarterly expansions in current account balances and deposits with banks abroad by 27 per cent to Dhs94.4bn, along with a 10.6 per cent increase in foreign securities to Dhs17.9bn.
Money Supply M1, which includes currency in circulation outside banks and monetary deposits, experienced a 4.2 per cent increase QoQ in Q4 2023. On an annual basis, it rose by 12.4 per cent to reach Dhs829.3bn by December.
Liquid assets in the UAE banking sector soared to Dhs742bn in Q4 2023, marking a 29 per cent YoY increase or Dhs165.7bn from Dhs576.3bn in the same period a year ago.
The increase in liquid assets signifies a positive trend for the UAE banking sector, indicating that banks possess sufficient assets to meet their short-term obligations.
Moody’s revised the outlook for the UAE banking system to positive from stable, citing a “resilient and dynamic non-oil economy” that will continue to present favorable operating conditions.
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