Iran war weighs on lending growth of top listed UAE banks in Q2 2026

By Zawya

By Staff Writer

Lending growth for the top 10 largest listed banks in the UAE fell in Q2 2026 compared to the first quarter as the US-Iran conflict intensified.

Net loans and advances grew 4.2% quarter-on-quarter (QoQ), outpacing aggregate deposits, which increased 2.3%, Alvarez & Marsal (A&M) said in a report analysing the 10 listed banks’ Q2 2026 performance.

These include First Abu Dhabi Bank (FAB), Emirates NBD (ENBD), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Mashreq Bank, Abu Dhabi Islamic Bank, Commercial Bank of Dubai, National Bank of Ras Al-Khaimah, Sharjah Islamic Bank, and National Bank of Fujairah.

Aggregate operating income declined 1.2% QoQ to AED 43.9 billion, driven mainly by a 6% contraction in non-interest income, partially offset by a 1.7% increase in net interest income.

Despite net interest margin compression, profitability of the banks remained resilient, with return on equity-- a metric for calculating a company’s financial performance--rising to 18.9% and return on assets, a yardstick that measure how efficiently a bank utilises its total assets to generate profit, stable at 2%, supported by a 2.7% QoQ increase in aggregate net income.

Asset quality remained resilient, with non-performing loans (NPL) at a historically low 2.3%. Cost of risk improved to 0.35% in Q2 2026, primarily driven by lower provisions at FAB, ENBD, ADCB, DIB and Mashreq.

“UAE banks delivered a mixed set of results during Q2 2026, characterised by continued balance sheet expansion, resilient asset quality and solid capital buffers,” said Sam Gidoomal, Managing Director and Head of Middle East Financial Services.

The backdrop of ongoing geopolitical tensions and related business disruption during the quarter has heightened concerns over potential asset quality deterioration and increased credit provisioning in the second half of 2026, he added.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)

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