UAE Islamic Banks Report 7.3% Asset Increase in Q1 2023

In a report that paints a vibrant picture of a financial sector on an upward trajectory, the Central Bank of the UAE (CBUAE) has disclosed that the Islamic banks in the country have observed robust growth in their assets. With the gross assets clocking in at a staggering $177 billion (Dhs650 billion) in Q1 2023, this marks a year-on-year upsurge of 7.31%, according to the latest data.

In an economy where Shariah-compliant banking plays an integral role, credit provided by Islamic banks touched Dhs400.2 billion at the close of March 2023. This signifies an annual growth rate of 2.51%, a slight but meaningful step up from Dhs390.4 billion in the same period the previous year.

But that’s not all. The month-to-month figures tell a story of consistent momentum, with credit experiencing a rise of 0.91% from Dhs397 billion in February 2023.

Deposits in Islamic banks were another area of positive performance, registering a 6.2% year-on-year jump to Dhs453.4 billion in Q1 2023. Meanwhile, investments in the Islamic banking sector reached a record of Dhs111.5 billion.

In comparison, conventional banks, which still maintain a dominant position in the UAE’s banking ecosystem, recorded total assets of Dhs3.12 trillion, a substantial 14.1% rise. Traditional banks account for 82.7% of the total assets of UAE banks, with Islamic counterparts holding the remainder.

The country’s banking sector also witnessed notable developments in savings deposits. The CBUAE reported a 7.4% surge in monthly savings deposits, reaching Dhs263 billion in March 2023. On an annual basis, this represents an increase of 4.7%. The lion’s share of savings deposits was held in the local currency, the UAE dirham, accounting for 80.4% of the total.

The trend in savings deposits shows no signs of abating, with the central bank observing a steady increase over the years – from Dhs152 billion in 2018 to Dhs245.8 billion in 2022.

Simultaneously, demand deposits have followed suit. March 2023 saw demand deposits rising to Dhs918.95 billion, a 3.25% increase compared to the same period a year earlier. Here, too, the UAE dirham dominated, making up 71.8% of the total.

An area of exponential growth was in time deposits, soaring by a remarkable 29.5% year-on-year in March 2023. The local currency accounted for 58.8% of total time deposits.

The crowning glory in the report is the record high in bank investments, which reached Dhs549 billion by the end of March 2023. This was the highest ever recorded and represented a whopping 16% year-on-year increase. Securities made up a significant portion of these investments at 45.6%.

In summary, the UAE banking sector, with both its Islamic and conventional components, is exhibiting signs of robust health and growth. Amidst a rapidly evolving global financial landscape, the UAE continues solidifying its position as a dynamic and burgeoning hub for banking and finance.