UAE Lenders’ external assets rise 3.1%

According to the Financial Stability Report released by the UAE Central Bank, the external assets of banks in the UAE experienced a 3.1 percent increase in 2022, primarily driven by a significant rise in cross-border exposure. These external holdings accounted for 39.4 percent of all consolidated assets in the banking sector.

Within the cross-border assets, 24.5 percent constituted holdings from local operations, while assets from foreign branches and subsidiaries comprised the remaining 14.9 percent. The report highlighted that the cross-border exposures from UAE entities were facilitated by ample credit capacity, a robust economic recovery, and favourable funding conditions.

The report further revealed that Saudi Arabia ranked among the top five countries in terms of the total assets held by subsidiaries and branches of UAE banks abroad. The United States led the list, followed by Turkey, the United Kingdom, Egypt, and Saudi Arabia.

By the end of 2022, the total value of cross-border assets reached 1 trillion dirhams ($272 billion), as indicated in the report.

Regarding external liabilities, the UAE banking system’s external liabilities accounted for 29.9 percent of total consolidated assets in 2022, marking a 2.3 percent decline compared to the previous year. Local operations represented 18.9 percent of the total consolidated assets, while foreign branches and subsidiaries accounted for 11 percent.

The decrease in external liabilities was primarily attributed to a decline in capital market funding, a contraction in non-resident deposits, and favourable funding conditions within the country, according to the report.

Additionally, the report highlighted that UAE banks maintained a net cross-border interbank lending position, accounting for 2.6 percent of total assets. This solidified their position as net lenders in the global interbank market.

The report also noted that UAE banks have expanded their global footprint, with operations in over 20 countries resulting from various cross-border acquisitions in recent years.

In May, Alvarez & Marsal, a global professional services firm, reported a 35 percent growth in net profits for the UAE banking sector during the first quarter of 2023, reaching 18.3 billion dirhams. Asad Ahmed, Managing Director and Head of Middle East Financial Services at Alvarez & Marsal, expressed confidence that the UAE banking sector would maintain its positive performance throughout the remainder of the year.