The return on equity (ROE) for banks operating in the UAE (61 banks) surged by approximately 41% in 2023, reaching 14.8% — the highest level in over a decade — compared to 10.5% in 2022, according to data released by the Central Bank of the UAE.
The sharp increase in ROE was driven by a rise in total net income, which jumped 56% to AED 74 billion in 2023, up from AED 47.5 billion in 2022, an increase of AED 26.5 billion.
Shareholders’ equity — the banking sector’s capital base — also grew by AED 47 billion, or 10.4%, reaching AED 500 billion at the end of 2023, compared to AED 453 billion at the end of 2022.
The growth in ROE and net income was supported by low-cost liquidity, as bank deposits rose by over AED 300 billion. Concurrently, demand for loans and credit facilities increased in the local market, driving a financing expansion of AED 112 billion last year. The upward trend in benchmark interest rates to their highest levels in two decades, combined with economic recovery, also improved customer creditworthiness, reduced non-performing loans, and lowered overall administrative and operating expenses.
Non-performing loans (NPLs) fell by AED 17.5 billion to AED 116.3 billion at the end of 2023, down 13% from AED 133.8 billion in 2022, reducing the NPL ratio to 5.3% of total bank credit in the UAE, compared to 6.6% at the end of 2022.
Provisions set aside to cover doubtful debts also declined by AED 11.3% to AED 70.2 billion in 2023, down from AED 81.5 billion in 2022. Administrative and general expenses (excluding interest costs) fell to 31.8% of total operating income, compared to 36.6% in 2022.
The Central Bank noted that these results demonstrate the UAE banking sector’s improved financial stability, capital adequacy, and resilience. The capital adequacy ratio reached 17.9% at the end of 2023, well above the Basel III minimum requirement of 10.5%, plus a 2.5% capital buffer, totaling 13% as mandated by the UAE Central Bank.
