UAE Banks See Funding Strain as Loans Outpace Deposits
UAE banks are seeing tighter funding as loans grow faster than deposits, while stronger deposit competition and rising costs threaten margins, MUFG analysts say.
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what happened
Dow Jones Newswires, citing MUFG analysts, reports that banks in the United Arab Emirates are facing increasing funding pressure. Robust credit demand is helping loan books expand more quickly than deposits.
Bank lending climbed 18.1% from a year earlier in 2Q, while deposits increased by about 14%. The sector's loan-to-deposit ratio consequently moved above 80%, compared with 77.7% in 2025. Borrowing linked to infrastructure, withdrawals of foreign-currency deposits and the end of central-bank liquidity support are all making funding conditions tighter, the analysts say.
The contest for deposits has also become more intense, with certain banks advertising promotional yields higher than the central bank's 3.9% base rate. MUFG says liquidity is still within regulatory requirements, but more expensive funding may weigh on margins and profitability.
why it matters
A widening gap between loan and deposit growth can increase banks' reliance on costlier funding and put pressure on earnings. The sector's liquidity remains within regulatory limits, according to MUFG.
instruments
sources
- U.A.E. Banks Face Margin Pressure as Lending Outpaces Deposits — Market Talk — Dow Jones Newswires, 12 October 2026 at 11:00 UTC
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