Led by ADIB, UAE banks surge ahead with region's fastest market cap growth
Riding a wave of economic resilience, regulatory support, and strategic innovation, the sector is emerging as a beacon of strength and stability in an otherwise mixed regional banking landscape.
Leading this remarkable performance is Abu Dhabi Islamic Bank (ADIB), which posted a 34 per cent surge in market value to reach $21.26 billion by the end of June. This leap pushed ADIB three spots higher in S&P's ranking of 20 regional banks, underlining its growing investor appeal and operational robustness. The bank's strong performance was driven by a string of innovative initiatives, including a partnership with Binghatti Holding to offer Shariah-compliant real estate finance and the launch of the UAE's first fractional sukuk investment platform, allowing retail participation with as little as $1,000 — significantly lowering the traditional entry barrier of $200,000.
ADIB's fundamentals remain equally compelling. The bank reported an 18 per cent year-on-year increase in net profit for the first quarter to Dh1.9 billion, powered by sustained customer growth, a solid balance sheet, and growing business momentum. Its return on average equity stood at 23.5 per cent in 2024, making it the second-best performing lender in the region. With a net interest margin of 3.88 per cent and an efficiency ratio of 29.58 per cent, ADIB continues to outperform peers in both profitability and cost management.
Other major Emirati banks also posted impressive gains in market value. First Abu Dhabi Bank, Emirates NBD, Abu Dhabi Commercial Bank, and Dubai Islamic Bank each reported double-digit growth in the second quarter. S&P attributed this collective uptrend to the UAE government's broad-based economic and social reforms, which have contributed to a reduction in credit risk and improved investor confidence. These reforms include financial market liberalisation, strategic investment in digital infrastructure, and a renewed push for economic diversification beyond oil.
The UAE banking system's strong capital buffers and robust regulatory framework have positioned it well to weather external headwinds, including geopolitical tensions and fluctuations in oil prices. The Central Bank of the UAE recently reported that sector-wide capital adequacy stood at 17.8 per cent as of March 2025, comfortably above Basel III requirements, while the non-performing loan ratio declined to 5.1 per cent from 5.6 per cent a year earlier.
S&P also noted that Israeli banks recorded strong second-quarter gains, despite geopolitical uncertainty linked to tensions with Iran. Mizrahi Tefahot Bank posted a market cap increase of 31.9 per cent to $16.89 billion, making its debut in the top-20 list. Bank Leumi and Bank Hapoalim followed closely, with respective gains of 25.2 per cent and 28.5 per cent. All three reported higher net profits in the first quarter, supported by sustained government backing, low non-performing loans, and stable asset quality. The Israeli banking sector achieved a near-record return on equity of about 15 per cent, according to S&P Ratings.
In contrast, Saudi Arabia's banking giants saw a sharp reversal in fortunes. Despite Al Rajhi Bank and Saudi National Bank holding onto their top two spots in terms of market value — at $100.89 billion and $57.27 billion respectively — several other lenders in the Kingdom posted significant declines. Riyad Bank tumbled five places in the ranking following a 12.8 per cent drop in market cap, the steepest fall among the 20 banks surveyed. Alinma Bank and Saudi Awwal Bank also lost ground, shedding 12.6 per cent and 10.1 per cent respectively. Analysts attribute this underperformance to investor concerns over slowing credit demand, weaker quarterly earnings, and potential impacts from prolonged oil price volatility.
Despite these divergent trends, the collective market capitalisation of the sampled banks reached $643.48 billion by the end of June 2025, underscoring the scale and dynamism of the region's financial institutions.
Financial analysts said the outlook for UAE banks remains upbeat. The International Monetary Fund, in its latest Article IV consultation, projected the UAE's non-oil GDP to grow by over 5 per cent in 2025, with the banking sector playing a pivotal role in funding new ventures, green energy projects, and digital transformation. Fitch Ratings recently affirmed a stable outlook for the UAE's banking sector, highlighting ample liquidity, strong capitalisation, and an improving operating environment as key strengths.
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