UAE loan defaults slide as economy brings stability

The loan default rate among the UAE's top banks has halved in the post-pandemic years as the growing economy brings stability into the employment and overall non-oil sectors.

- Waheed Abbas

According to the "What's Behind the Surge in UAE Banks' Consumer Lending" report published by S&P Ratings, nonperforming loans (NPLs) for the 10 largest UAE banks improved to 3.0 per cent of their loan portfolios as of end-June 2025, down from the peak of 6.1 per cent at end-2020.

As of June 2025, total consumer loans in the country reached Dh540.9 billion, a significant 55 per cent increase from year-end 2021 levels, or an average annual growth rate of 13.6 per cent.

Bad loan rates had spiked during the pandemic year of 2020 in the UAE as companies reduced workforce and many closed operations due to the Covid-19 restrictions.

During the same period, the cost of risk decreased to 40 bps from 169 bps. "We expect NPLs to remain broadly stable thanks to the supportive economic environment," S&P analysts said.