The UAE banking sector continued its growth momentum last year and is poised for further growth and recovery in 2024, thanks to the success of the Central Bank of the UAE’s (CBUAE) strategies and policies in setting the necessary frameworks and regulations to deliver sustainable growth for the sector, and its commitment to promoting economic and financial stability in the UAE.
During the past year, CBUAE succeeded in maintaining a stable and efficient banking and financial system by providing efficient and effective central banking services. It also made record levels of growth in assets, credit, deposits and investments, and maintained strong levels of capital efficiency, provisions and reserves, to ensure compliance with the highest standards of governance, transparency and risk management.
The banking sector has been able to confirm its strength and flexibility in dealing with all global geopolitical and economic challenges and changes. The indicators of rising assets, financing and capital adequacy ratios reflect the sector’s flexibility and resilience to adapt to the changes the world is witnessing, as well as its ability to continue its role in providing the appropriate conditions to achieve economic and social development goals, while ensuring compliance with international standards in governance and risk management.
Bank Assets
At the end of the fourth quarter of 2023, total assets of banks operating in the UAE increased by 3.1% (q-o-q), reaching AED 4.075 trillion. During the period between December 2022 and December 2023, the total assets of banks operating in the UAE increased by 11.1% (y-o-y).
According to the 4th Quarter Report of 2023 issued by the CBUAE on the Monetary, Banking & Financial Markets Developments, gross credit increased by 0.5% (q-o-q), reaching 1.992 trillion at the end of December 2023. On an annual basis, gross credit increased by 6.0%. At the end of December 2023, total deposits of resident and non-resident customers with banks operating in the UAE rose by 4.2% (q-o-q) and annually by 13.5% (y-o-y), reaching AED 2.522 trillion.
Capital & Reserves
Aggregate Capital and Reserves of banks operating in the UAE increased by 5.2% (q-o-q), reaching AED 488.7 billion at the end of the fourth quarter of 2023. At the end of December 2023, Total Capital Adequacy Ratio stood at 17.9%, remaining well above the 13% Capital Adequacy Ratio, including the 2.5% Capital Conservation Buffer requirement and the 8.5% Tier1 Ratio, prescribed by the Central Bank regulations in compliance with the Basel III guidelines.
Foreign Assets of the Central Bank
At the end of the fourth quarter of 2023, the Central Bank’s foreign assets increased by 16.7% (q-o-q), reaching AED 681.2 billion. This rise was because of quarterly expansions in 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).
Monetary Developments
Money Supply M1, which comprises Currency in Circulation outside Banks(Currency Issued – Cash at banks) plus Monetary Deposits, increased by 4.2% (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was 12.4% (y-o-y) hike in the monetary aggregate M1, reaching AED 829.3 billion at the end of December 2023.
Money Supply M2 (M1 plus Quasi Monetary Deposits(Resident Time and Savings Deposits in Dirham, plus Resident Deposits in Foreign Currencies)), grew by 6.0% (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was 18.8% (y-o-y) increase in Money Supply M2, reaching AED 2,023.4 billion at the end of December 2023.
Money Supply M3 (M2 plus government deposits at banks and at the Central Bank) also rose by 4.0% (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was a 16.0% (y-o-y) rise in Money Supply M3, reaching AED 2,445.2 billion at the end of December 2023.
Liquid Assets
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% y-o-y or AED165.7 billion, compared to AED576.3 billion at the end of the fourth quarter of 2022. It also increased by 9.6% q-o-q, or AED 64.7 billion, compared to AED 677.28 billion at the end of the third quarter of 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. This is important for maintaining financial stability and confidence in the banking system.
Tier1 Capital Adequacy Ratio reached 16.6% at the end of the fourth quarter of last year against 16.2% at the end of fourth quarter in 2022.
Common Equity Tier 1(CET 1 ) Capital Ratio rose by 14.9% at the end of the fourth quarter of 2023 as compared to 14.4% at the end of the fourth quarter in 2022.
