UAE banks hold firm after ceasefire

Capital, liquidity and asset quality at the UAE’s largest banks remain robust, according to Dubai-based Al Ramz Capital, which says a ceasefire between Washington and Tehran has removed an immediate geopolitical overhang that had weighed on sentiment, valuations and foreign risk appetite. The firm said direct exposure to sectors most sensitive to conflict, including real estate, hospitality, aviation, transport and trade finance, makes up roughly 23% to 27% of gross loans at large banks, a level it considers manageable.

That assessment comes after Gulf markets staged a sharp relief rally on 8 April, when the US and Iran agreed to a fragile two-week ceasefire that included the reopening of the Strait of Hormuz. Dubai’s main market surged 6.9% that day, its biggest intraday gain since March 2020, while Abu Dhabi’s benchmark rose 2.9%. Bank shares were among the biggest movers, with Emirates NBD jumping 11% and First Abu Dhabi Bank gaining 5%, reflecting how closely lender valuations had tracked the rise and easing of regional risk.

System-wide banking data suggest the sector entered that volatile period from a position of strength. The Central Bank of the UAE said banking sector assets rose 17.1% year on year to AED 5.34 trillion at the end of 2025. Gross credit expanded 17.9% to AED 2.57 trillion, while total deposits climbed 16.2% to AED 3.307 trillion. The capital adequacy ratio stood at 17.1%, the Eligible Liquid Assets Ratio at 20.1%, and the net non-performing loans ratio improved to 1.6%, with the overall NPL ratio declining to 3.3%. Those figures point to a banking system that still has funding depth and loss-absorption capacity even after weeks of market strain.

Large lenders have also continued to post balance-sheet growth. First Abu Dhabi Bank, the country’s biggest lender by assets, reported that loans and advances rose 17% in 2025 to AED 616 billion, customer deposits increased 7% to AED 841 billion and total assets reached AED 1.4 trillion, while full-year net profit rose to a record AED 21.1 billion. Emirates NBD, Dubai’s largest bank by assets, said total gross loans surged 24% to AED 658 billion in 2025, deposits rose 18% to AED 786 billion and total assets reached AED 1.16 trillion. Those results underline why analysts continue to see the leading banks as well capitalised institutions with diversified earnings streams, even when market sentiment turns sharply risk-averse.

Still, the relief is not the same as a clean return to normality. Al Ramz warned that second-order effects could prove more important than direct exposure. It said personal lending, consumer books and retail mortgages could come under pressure if conflict resumes, economic activity slows, employment softens or confidence in the property market weakens. That caution aligns with other market assessments. Reuters reported last month that S&P Global Ratings saw no evidence of major funding outflows from Gulf banks, but warned that a prolonged conflict could trigger deposit flight, stress on funding conditions and higher losses in sectors such as logistics, transport, tourism, real estate, retail and hospitality.

Regulators moved before any broader loss of confidence could take hold. On 17 March, the UAE central bank rolled out support measures that included enhanced access to reserve balances, term liquidity facilities in dirhams and dollars, and temporary relief on some capital and funding buffers. The central bank said the financial system had shown resilience under extraordinary circumstances without any material impact on banking sector health or payment systems. Reuters reported that the liquidity and eligible assets available to banks through the regulator amounted to close to $250 billion, with Jefferies estimating the package created access to as much as $58.3 billion in liquidity support.

That official backstop matters because the conflict has tested more than portfolios. Ratings agencies and investors have been watching for operational disruption, cyber vulnerabilities, pressure on trade flows and any slowing in property transactions and tourism-related cash generation. The Strait of Hormuz remains central to that calculation. Its reopening removed part of the extreme tail risk that markets had begun to price in, but investors are still treating the rebound cautiously, with strategists describing it more as tactical repositioning than a full return of conviction.