The UAE banking sector continued its growth momentum in 2023 and is poised for further growth and recovery this year, as the central bank is setting the necessary frameworks and regulations to foster sustainable growth and financial stability in the country.
The indicators of rising assets, financing and capital adequacy ratios reflect the sector’s flexibility and resilience to adapt to the evolving operating environment and continue funding economic and social development goals.
Total assets of banks operating in the UAE increased by 3.1% quarter-on-quarter (QoQ) in Q4 2023 to reach AED 4.075 trillion. On an annual basis, the banks reported an 11% year-on-year (YoY) increase in assets in 2023.
The Central Bank of the UAE’s (CBUAE) 4th Quarter Report of 2023 shows that gross credit increased by 0.5% QoQ to AED 1.99 trillion at the end of December 2023. On an annual basis, gross credit increased by 6%.
Deposits of resident and non-resident customers with banks operating in the UAE rose by 4.2% QoQ and annually by 13.5% YoY to reach AED 2.522 trillion as of December 31, 2023.
Capital and reserves of banks operating in the UAE rose by 5.2% QoQ to reach AED 488.7 billion in Q4 2023. Similarly, the total capital Adequacy ratio stood at 17.9%, remaining well above the 13% that is required by the central bank under the Basel III guidelines.
CBUAE’s foreign assets increased by 16.7% QoQ to AED 681.2 billion in Q4 2023. The growth was attributed to current account balances and deposits with banks abroad by 27% (a quarterly increase of AED 94.4 billion) and in foreign securities by 10.6% (a quarterly rise of AED 17.9 billion).
Money Supply M1, which comprises currency in circulation outside banks (currency issued – cash at banks) plus Monetary Deposits, increased by 4.2% QoQ in Q4 2023. On an annual basis, there was a 12.4% YoY hike in the monetary aggregate M1 to AED 829.3 billion in 2023.
Liquid assets in the UAE banking sector rose to AED742 billion at the end of the fourth quarter of last year, an increase of 29% YoY or AED165.7 billion, compared to AED576.3 billion Q4 2022. It also increased by 9.6% QoQ or AED 64.7 billion, compared to AED 677.3 billion in Q3 2023.
The increase in liquid assets is a positive sign for the UAE banking sector, as it indicates that banks have sufficient assets to meet their short-term obligations.
