The UAE banking sector maintained its growth trajectory in the previous year and is expected to experience further expansion and recovery in 2024. This positive outlook can be attributed to the effective strategies and policies implemented by the Central Bank of the UAE (CBUAE), which have established the necessary frameworks and regulations to foster sustainable growth in the sector. The CBUAE has also demonstrated its commitment to promoting economic and financial stability within the UAE.
Read more: 10 UAE banks record $12.6 billion in net profits in 2023
According to WAM, throughout the past year, the CBUAE has successfully maintained a stable and efficient banking and financial system by providing reliable central banking services. The sector has witnessed substantial growth in assets, credit, deposits, and investments, while maintaining robust levels of capital efficiency, provisions, and reserves. These measures ensure compliance with the highest standards of governance, transparency, and risk management.
The banking sector has proven its strength and adaptability in the face of global geopolitical and economic challenges. Indicators such as increasing assets, financing, and capital adequacy ratios highlight the sector’s resilience and ability to adjust to the evolving global landscape. Moreover, the sector continues to play a vital role in creating favorable conditions for achieving economic and social development goals, while adhering to international standards in governance and risk management.
Bank assets
By the end of the fourth quarter of 2023, the total assets of banks operating in the UAE experienced a quarterly increase of 3.1 percent, reaching AED4.075 trillion. Over the period from December 2022 to December 2023, these assets grew by 11.1 percent on an annual basis.
According to the CBUAE’s 4th Quarter Report of 2023 on Monetary, Banking & Financial Markets Developments, gross credit increased by 0.5 percent quarterly, reaching AED1.992 trillion by the end of December 2023. On an annual basis, gross credit witnessed a growth of 6.0 percent. Additionally, total deposits from both resident and non-resident customers with banks operating in the UAE rose by 4.2 percent quarterly and 13.5 percent annually, reaching AED2.522 trillion by the end of December 2023.
Capital & reserves
Aggregate Capital and Reserves of banks operating in the UAE experienced a quarterly increase of 5.2 percent, reaching AED488.7 billion by the end of the fourth quarter of 2023. At the end of December 2023, the Total Capital Adequacy Ratio stood at 17.9 percent, surpassing the Central Bank’s prescribed requirements of a 13 percent Capital Adequacy Ratio, including the 2.5 percent Capital Conservation Buffer, and an 8.5 percent Tier 1 Ratio. These regulations align with the Basel III guidelines.
Foreign assets of the Central Bank
By the end of the fourth quarter of 2023, the Central Bank’s foreign assets increased by 16.7 percent quarterly, amounting to AED681.2 billion. This rise can be attributed to expansions in Current Account Balances and Deposits with banks abroad, which grew by 27 percent quarterly (an increase of AED94.4 billion), as well as an increase in Foreign Securities by 10.6 percent quarterly (a rise of AED17.9 billion).
Monetary developments
During the fourth quarter of 2023, Money Supply M1, which includes Currency in Circulation outside Banks (Currency Issued – Cash at banks) and Monetary Deposits, increased by 4.2 percent quarterly. On an annual basis, there was a 12.4 percent hike in the monetary aggregate M1, reaching AED829.3 billion by the end of December 2023. Money Supply M2, which encompasses M1 plus Quasi Monetary Deposits (Resident Time and Savings Deposits in Dirham, plus Resident Deposits in Foreign Currencies), grew by 6.0 percent quarterly during the fourth quarter of 2023.
On an annual basis, Money Supply M2 experienced a significant increase of 18.8 percent, reaching AED2,023.4 billion by the end of December 2023. Furthermore, Money Supply M3, which includes M2 along with government deposits at banks and the Central Bank, rose by 4.0 percent quarterly during the fourth quarter of 2023. On an annual basis, Money Supply M3 witnessed a rise of 16.0 percent, reaching AED2,445.2 billion by the end of December 2023.
Liquid assets
Liquid assets within the UAE banking sector reached AED742 billion by the end of the fourth quarter of the previous year. This represents a notable increase of 29 percent on an annual basis, equivalent to AED165.7 billion compared to AED576.3 billion at the end of the fourth quarter of 2022. Additionally, there was a quarterly increase of 9.6 percent, or AED64.7 billion, compared to AED677.28 billion at the end of the third quarter of 2023.
The growth in liquid assets is a positive indication for the UAE banking sector, as it signifies that banks possess sufficient assets to fulfill their short-term obligations. This is crucial for maintaining financial stability and instilling confidence in the banking system.
Tier 1 Capital Adequacy Ratio
The Tier 1 Capital Adequacy Ratio reached 16.6 percent by the end of the fourth quarter of the previous year, compared to 16.2 percent at the end of the fourth quarter in 2022.
Common Equity Tier 1 (CET1) Capital Ratio
The Common Equity Tier 1 (CET1) Capital Ratio experienced a growth of 14.9 percent by the end of the fourth quarter of 2023, as compared to 14.4 percent at the end of the fourth quarter in 2022.
For more news on banking & finance, click here.
