Banks across the GCC are likely to ramp up provisions for loan and lease losses over the next two years, based on data from Visible Alpha, a unit of S&P Global Market Intelligence.
Total provisions are projected to climb to $10.03 billion in 2026 and $11.59 billion in 2027, compared with $7.63 billion in 2025.
Exposure to the real estate sector remains a key vulnerability for UAE banks as the Middle East conflict continues, with risks expected to intensify if the situation persists. Mohamed Damak noted that the UAE—particularly Dubai—is highly susceptible to indirect effects of the conflict due to its large expatriate population and heavy reliance on foreign real estate investment.
A major concern is a potential decline in rental income, which is critical for servicing loans tied to income-generating properties.
Among lenders, Dubai Islamic Bank had the highest share of real estate loans at 25.50% of total loans at end-2025, followed by First Abu Dhabi Bank at 25.14%, along with Mashreqbank and Abu Dhabi Commercial Bank. Emirates NBD Bank had the lowest exposure at 10.66%.
The report highlighted rising non-performing loan risks, especially among midsize developers and subcontractors that are more exposed to delayed payments and increasing funding and construction costs. Ranya Gnaba said banks are expected to adopt more forward-looking provisioning strategies in anticipation of a potential economic slowdown.
Despite these risks, UAE banks entered the current period from a position of strength, supported by solid earnings, strong capital buffers, and more diversified loan portfolios than in previous cycles. Damak added that while the ultimate impact of the conflict remains uncertain, banks’ robust capitalisation and profitability should help them absorb a potential deterioration in asset quality.
Meanwhile, the Texas ratios of the five largest UAE banks—a measure of their capacity to withstand losses—have improved markedly in recent years. Mashreqbank reported the lowest ratio at 4.85% at end-2025, down from 20% in 2021, while Dubai Islamic Bank had the highest among the group, though it also more than halved to 12.13% over the same period.
Click here for more on Banking
