UAE Banking Sector Mid-Year Review 2025: Stability, Strategy, and the Shift Toward Intelligent Finance

The first half of 2025 has reinforced the UAE’s position as the financial services epicentre of the Middle East. Amid ongoing global uncertainty and fast-moving technological change, UAE banks are demonstrating strong fundamentals, proactive governance, and digital-first agility—key traits that align with the nation’s Vision 2031 strategy of becoming a top 10 global financial hub.

At Baker Tilly UAE, we see these market dynamics not as mere trends, but as catalysts for strategic transformation across our clients’ operating models, risk frameworks, and investment roadmaps. Below, we unpack the latest sector performance, identify where strategic opportunities lie, and outline how institutions can evolve in this environment.

Financial Resilience Underpins Market Confidence

UAE banks posted solid earnings in H1 2025, led by effective cost control and margin discipline:

• Aggregate net profits grew by 8.4% quarter-on-quarter, despite rising tax liabilities and compressed net interest margins.
• Impairment charges fell by nearly 60%, while fee-based income surged by 18%, reflecting an industry shift towards non-interest revenue models.
• Sector-wide assets reached AED 4.749 trillion by end-April, with a loan-to-deposit ratio (LDR) of 76.3%, indicating ample liquidity and prudent lending practices.

A clear evolution is underway in the industry: institutions are moving beyond short-term cost fixes toward building more sustainable, long-term profitability. The performance of UAE banks this year reflects that mindset — they're not just managing costs, but actively reshaping their income models, strengthening their balance sheets, and making smarter use of capital to drive long-term growth.

Digital Banking: From Utility to Competitive Edge

With 80%+ of banking transactions now digital, digital transformation is no longer a technology project—it is a strategic imperative. The launch and growth of banks like Wio and Zand underscore the market’s appetite for personalized, app-native experiences.

Our clients in the banking sector are increasingly adopting:

• AI-driven credit scoring and KYC automation
• Embedded finance capabilities for SMEs and FinTechs
• Regulatory sandboxes to pilot new models

Baker Tilly UAE supports this evolution by offering digital readiness assessments, fintech regulatory advisory, and IFRS-aligned accounting for digital assets and virtual service models.

The Governance Imperative: Regulatory Compliance as a Value Multiplier

Recent enforcement actions, including AED 339 million in AML fines across the sector, highlight the UAE’s intensified regulatory focus. This trend is not merely compliance-driven; it reflects the UAE’s broader strategy to align with FATF, Basel III, and ESG disclosure frameworks.

We advise our clients to treat risk and compliance functions as strategic assets. Services like:

• Outsourced Finance Officer and MLRO roles (especially in DIFC and ADGM)
• Regulatory reporting under DFSA/FSRA/CBUAE frameworks
• AML/CFT risk assessments and governance reviews

are no longer optional—they are foundational to sustainable growth and investor confidence.

Investment Outlook: M&A, Digital Scale-Ups, and Capital Markets

UAE banks are entering a new investment cycle. With rising returns on equity (RoE ~18.6%) and expanding capital buffers, larger players are targeting regional acquisitions, while mid-tier institutions explore IPO readiness and embedded fintech investments.

Baker Tilly UAE works closely with financial institutions and sovereign investment vehicles to structure:

• Strategic due diligence and financial modeling for mergers and acquisitions
• Valuation and deal structuring for fintech acquisitions and cross-border expansion
• Capital raising strategies and IPO readiness for regulated entities

Our Outlook

The second half of 2025 will likely see continued margin normalization, sustained investment in regtech and AI, and deepening cross-border synergies—especially through corridors with India, KSA, and Singapore.

At Baker Tilly UAE, we are actively partnering with banks, investment firms, and digital finance providers to help navigate this next phase. Whether it’s strategic planning, regulatory compliance, or financial due diligence, our integrated advisory model supports the financial services ecosystem across mainland, DIFC, and ADGM.

Connect with us to learn how Baker Tilly can support your journey from regulatory resilience to strategic reinvention.