Capital and reserves of UAE banks rise 10.6% to AED495bn

DUBAI: The banking sector in the United Arab Emirates (UAE) has exhibited a remarkable performance as evidenced by the recent statistics released by the Central Bank of the UAE (CBUAE).

As of June 2024, the total capital and reserves of banks operating in the country reached AED495.2 billion, marking a year-on-year (YoY) increase of 10.6 per cent from AED447.8 billion in June 2023.

The robust growth reflects not only the resilience of the UAE’s banking industry but also its capacity to adapt to economic fluctuations and challenges.

The CBUAE’s data indicates a consistent upward trend on both a monthly and half-yearly basis, with a 1.5 per cent increase in capital and reserves from the previous month and a 1.2 per cent rise during the first half of 2024.

It is important to note that the capital and reserves metrics, as outlined by the CBUAE, exclude subordinated borrowings and deposits, yet they encompass profits accrued during the current fiscal year.

This distinction underscores the authentic growth of banks’ internal resources, which reinforces their stability and capacity to lend.

Active participation

National banks have significantly contributed to this optimistic scenario, accounting for 86.3 per cent of the total capital and reserves—translating to AED427.5 billion at the end of June. The figure represents a similar year-on-year growth of 10.6 per cent, paralleling the overall increase in capital.

The sustained performance of national banks signals their pivotal role in the UAE’s financial ecosystem, driving economic activity and facilitating credit flow.

In addition to capital growth, the statistics reveal that investments by UAE banks have also reached unprecedented levels.

By the end of June 2024, total bank investments exceeded AED680 billion, achieving the highest level in the history of the UAE banking sector.

It represents a remarkable year-on-year increase of 18.4 per cent, translating to AED680.2 billion in comparison to AED574.3 billion in June 2023. Such substantial investments not only illustrate the banks’ confidence in the economic environment but also depict their active participation in funding growth initiatives across various sectors.

Analysing the composition of these investments, bonds held to maturity emerged as a significant component, accounting for 48.8 per cent of total bank investments, valued at AED332.2 billion.

The figure reflects both a monthly increase of 0.1 per cent and a significant annual growth of 26.2 per cent.

Moreover, investments in securities representing third-party debt constituted 41.1 per cent of total investments, amounting to AED279.6 billion, which also demonstrates a solid annual uptick of 12.5 per cent.

Furthermore, banks have also expanded their portfolios in equities, reaching AED16.7 billion, which represents a substantial 38 per cent increase YoY. Other forms of investments showed moderate growth, further diversifying the banks’ investment strategies.

The rich array of investment types showcases the banks’ strategic approaches in managing risks while optimising returns amid evolving market conditions.