Diversification efforts bolster stability of UAE’s positive rating

UAE banks' net profit soar to $9 bn in 2022
UAE rating
The UAE economy grew by 7.6% last year, the most in 11 years

Moody’s Investors Service has maintained the UAE’s ‘Aa2’ long-term local and foreign currency issuer ratings with a “stable outlook” as the country boosts non-oil sector growth and continues to diversify its economy.

“Aa” ratings are high-quality and carry a very low credit risk.

“The rating affirmation is underpinned by Moody’s assessment that the UAE federal government’s debt level will remain very low, supported by its continued adherence to balanced budget targets and limited spending needs due to the scale of fiscal decentralization within the country,” the agency said in a report.

The stable outlook for the Arab world’s second-largest economy reflects efforts by the UAE government “to expand non-hydrocarbon revenue, promote non-hydrocarbon sector development, and attract foreign businesses and talent,” according to the report.

According to the UAE Central Bank, the UAE economy grew by 7.6 percent last year, the most in 11 years, after expanding by 3.9 percent in 2021.

The UAE government’s revenue rose by about 7% to 143.1 billion dirhams ($39 billion) in the fourth quarter of 2022, according to the Ministry of Finance last week.

Read more: UAE Economy Minister shares vision for economic openness in 2023 and beyond

UAE banks’ net profit soar to $9 bn


The four largest banks in the UAE, which account for 77% of bank assets, saw their combined profit rise 12.5% year on year to $9 billion in 2022, driven by higher net interest income and lower provisioning charges as the UAE’s operating environment improved.

According to Moody’s Investors Service, the four largest banks, First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, and Dubai Islamic Bank, are likely to see their profitability improve—albeit at a slower rate—as pandemic-related provisioning charges normalize and the reversal in benchmark interest rates and restored business activity continues.

Net interest income expanded by 28%, while combined non-interest income dropped by 2%, owing primarily to one-time gains in 2021 that did not repeat in 2022.

Moreover, the UAE banks maintained strong capital buffers, with an aggregate tangible common equity ratio of 14.8% as of December 2022.

For more on the UAE economy, click here.