UAE's Banking Sector Assets Reach AED 4.87 Trillion in May

UAE Banking Sector Surges as Credit Growth Signals Economic Momentum

The UAE's banking sector demonstrated robust expansion in May 2025, with total banking assets climbing 2.7% month-over-month to reach AED 4.878 trillion, according to the Central Bank of the UAE. This growth trajectory, driven by both domestic and foreign credit expansion, reflects the Emirates' continued economic diversification and its position as a regional financial hub amid shifting global capital flows.

Banking Assets Hit New Heights

The UAE's banking system has shown remarkable resilience and growth, with total assets including certificates of deposit rising from AED 4.749 trillion in April to AED 4.878 trillion by the end of May. More impressively, the first five months of 2025 witnessed a substantial 6.97% increase in total assets, equivalent to AED 318 billion compared to AED 4.56 trillion at the end of December 2024.

This expansion mirrors similar trends seen in other Gulf financial centers, particularly following the region's strategic pivot toward becoming less dependent on oil revenues and more focused on financial services, technology, and trade facilitation.

Credit Growth Accelerates Across Sectors

Domestic vs. Foreign Credit Dynamics

Total credit expanded by 1.5% from AED 2.259 trillion in April to AED 2.293 trillion in May, with the year-to-date growth reaching 5.14% or AED 112 billion. Notably, foreign credit growth significantly outpaced domestic lending, with foreign credit increasing by AED 26.9 billion compared to AED 7.1 billion in domestic credit growth.

This foreign credit surge suggests the UAE is increasingly serving as a financing hub for regional projects and international businesses seeking access to Middle Eastern markets. The trend aligns with the UAE's broader strategy to position itself as a bridge between East and West, similar to Singapore's role in Southeast Asia.

Sectoral Credit Distribution

Within domestic credit, government sector lending rose 2%, while private sector credit increased by a more modest 0.8%. However, credit to public sector entities (government-related entities) declined by 2.4%, and lending to non-banking financial institutions dropped 2.5%. This shift indicates a rebalancing toward direct government and private sector financing, potentially reflecting infrastructure investments and economic diversification initiatives.

Deposit Growth Reflects Confidence

Total bank deposits increased 1.8% to AED 3.018 trillion in May, driven primarily by resident deposits which grew 1.9% to AED 2.741 trillion. Non-resident deposits also expanded, albeit at a slower pace of 0.6% to AED 277.2 billion.

The steady inflow of both resident and non-resident deposits underscores growing confidence in the UAE's banking system and economic stability. For international investors, this trend suggests the UAE continues to attract capital despite global economic uncertainties and regional geopolitical tensions.

Money Supply Indicators Show Mixed Signals

The monetary data reveals interesting dynamics across different money supply measures. M1 money supply increased modestly by 0.4% to AED 1.015 trillion, while M2 declined by 1.6% to AED 2.474 trillion. However, M3 expanded by 1.7% to AED 2.948 trillion, suggesting increased liquidity in longer-term deposits and government holdings.

The monetary base surged 2.2% to AED 836.7 billion, driven by increases in issued currencies (2.1%) and reserve accounts (29.2%). This expansion provides the banking system with enhanced capacity for future lending growth.

Central Bank's Foreign Assets Remain Stable

The UAE Central Bank's foreign assets held steady at AED 939.1 billion in May, compared to AED 937.5 billion in April. These assets comprise AED 407.4 billion in banking balances and deposits abroad, AED 487 billion in foreign securities, and AED 44.7 billion in other foreign assets.

This stability in foreign reserves, despite domestic growth, demonstrates the Central Bank's confidence in maintaining adequate international liquidity buffers while supporting domestic economic expansion.

Market Implications and Outlook

For investors and market participants, these figures suggest several key trends. The UAE's banking sector is experiencing healthy growth driven by both domestic economic activity and its role as a regional financial center. The pronounced growth in foreign credit indicates the UAE is successfully leveraging its strategic position to capture cross-border financing opportunities.

The mixed money supply signals suggest the Central Bank is managing liquidity carefully, avoiding excessive monetary expansion while ensuring adequate credit availability. This balanced approach positions the UAE favorably compared to economies experiencing either excessive monetary tightening or inflationary pressures from loose monetary policy.

The continued strength in deposits, particularly from residents, indicates domestic confidence in the banking system and suggests sustainable funding for future credit growth. For regional comparison, this performance outpaces many emerging market banking systems currently facing deposit outflows or credit constraints.