Abu Dhabi: The ratio of non-performing loans to total loans at UAE banks fell to 2.3 per cent by the end of the third quarter of 2026, compared with 2.5 per cent in the second quarter and 2.8 per cent in the first quarter, Central Bank data showed.

Meanwhile, total bank credit increased by 17.3 per cent year on year to Dh2.908 trillion by the end of September, recording growth of 5.5 per cent over the three-month period.

The Central Bank's financial soundness indicators for the third quarter showed that strong growth in bank credit did not negatively affect asset quality or banks' ability to manage risks.

The expansion in financing coincided with a decline in non-performing loans, an increase in regulatory capital and liquidity remaining at comfortable levels, reflecting the banking sector's resilience and capacity to finance the economy and withstand potential shocks.

Bank assets rose by 11.8 per cent year on year to a record Dh5.815 trillion.

The growth reflects continued demand for financing from the government, companies and individuals, amid expanding economic and real estate activity and increased demand from companies for liquidity to finance new projects and expansion.

The non-performing loan ratio of 2.3 per cent means that for every Dh100 of total bank loans, about Dh2.30 is classified as non-performing.

Total loans used to calculate the ratio stood at approximately Dh3.252 trillion, compared with non-performing loans of Dh73.25 billion.

The total loans used to calculate the non-performing loan ratio differ from the overall bank credit figure because, under the Central Bank's methodology, the latter includes loans granted to other deposit-taking institutions.

The value of non-performing loans fell to approximately Dh73.25 billion at the end of September, from Dh76.37 billion in June and Dh84.27 billion at the end of March 2026. This represents a decline of more than Dh11 billion in six months despite continued growth in financing.

The fall in both the ratio and value of non-performing loans, alongside the expansion of loan portfolios, indicates that lending growth has not been accompanied by a similar increase in problem loans.

Banks also strengthened their capital positions during the quarter. Total regulatory capital rose to more than Dh701 billion at the end of September, from Dh679.2 billion in the previous quarter, an increase of approximately Dh22.8 billion in three months.

The regulatory capital-to-risk-weighted-assets ratio remained stable at 17 per cent, providing banks with a capital base to absorb potential shocks and continue financing the economy.

Liquidity indicators also improved. The liquidity coverage ratio rose to 134.6 per cent from 133.7 per cent in the second quarter, while the net stable funding ratio reached 111.4 per cent.

Profitability indicators, however, recorded a slight decline. Return on equity fell to 14.7 per cent from 15.2 per cent in the previous quarter, while return on assets eased to 2 per cent from 2.1 per cent.

Overall, the indicators show that UAE banks continued to expand financing while maintaining credit quality and strong levels of capital and liquidity, supporting the sector's ability to finance individuals and companies and withstand economic and financial changes.