Moody’s has upgraded its outlook on UAE banks to positive from stable, despite ongoing pressures from subdued profitability and geopolitical uncertainties. The ratings agency said the revision reflects the country’s continued economic diversification and structural banking reforms.
Francesca Paolino, AVP and Analyst at Moody’s Ratings, noted that operating conditions in the UAE remain strong, creating growth opportunities for banks, supported by ample liquidity. Moody’s expects banks to maintain solid liquidity levels, driven by economic momentum, reforms and a growing resident population that is likely to boost deposit inflows.
Paolino also pointed to improving asset quality across UAE banks, although she acknowledged some resilience in the real estate sector even as property prices are expected to soften.
Moody’s added that easing monetary policy could compress net interest margins, leading to a slight dip in profitability, though it is expected to remain healthy overall.
Across the wider GCC, Moody’s continues to maintain a stable outlook for most banking sectors despite lower oil prices. Senior Analyst Badis Shubailat said current oil price levels still support business confidence, while moderate inflation, backed by government subsidies and strong fiscal buffers, is expected to persist. He added that ongoing efforts to diversify economies away from hydrocarbons would continue to support non-oil sector growth.
Among GCC countries, Oman is the only nation to see its outlook revised from positive to stable, with Moody’s citing solid operating conditions and improving asset quality as key factors.
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