To buy shares in UAE banking stocks, you need a UAE stock broker that offers access to the ADX exchange like eToro.
3 things investors need to know about UAE banking stocks
There is no shortage of ways to invest in the UAE stock market and banking stocks are very popular, but a key challenge that faces investors when trading a number of these companies is the fact that the underlying market can be highly illiquid. Despite many banks in the region being worth billions of US Dollars, days can pass without any trade at all being recorded on the exchange. That results in two key issues, with available stock being hard to find and spreads being pushed out.
Over the last week, Emirates Islamic Bank has been on the radar as a notable intra-day mover, but there has been no fundamental news to support the price action. Daily trade data which is freely available from the Dubai Financial Markets website underlines the challenge here – between February 3rd and February 7th, just three trades were recorded on exchange, resulting in a 5.3% fall one day then a 10% increase the next.
A sector that’s on the up?
In general, banks in the region are certainly faring well, with stubbornly high interest rates – the Dirham is pegged to the US Dollar, so the local base rate is closely tied to that set by the Federal Reserve – preserving net interest margins to an extent, whilst falling levels of loan defaults are also helping serve up bumper profits. However, if you’re looking to trade in the sector successfully, it’s likely going to be vital that you ensure there’s a reasonable flow of trade in the underlying market.
Again, the relevant exchange websites have this information freely available. First Abu Dhabi Bank, with a market cap of more than $40billion, sees daily transaction volumes that run to tens of millions of US Dollars posted each day. That’s still a fraction of the flow that would be associated with a mainstream European or US bank, but it’s an important metric to check. An active market means you’re less likely to struggle when you want to close a position, or indeed see profits eroded by a wider than expected spread.
The fundamentals do count
The share price movements by Dubai’s biggest bank, Emirates NBD, illustrated very clearly in late January 2025 that investors can be harsh in their assessment of management decisions. That backdrop of growing margins and falling impairments makes for a great foundation as the bank illustrated when it printed a 7% annual profit increase for 2024, but in a bid to conserve capital, directors elected to trim the dividend by around 16%. Whilst the caution was probably warranted with the expectation being net interest margins will continue to trend lower in the year ahead, the market’s assessment was somewhat harsh, with the share price – which had been trading at an all time high – falling by almost 10% on the day.
A property proxy?
It’s worth bearing in mind that loan books at banks in the region are geared to an extent towards the property market, with the highly detailed quarterly UAE Banking Pulse by consultancy Alvarez & Marsal giving some great insight here. Towards the end of 2024, real estate and construction accounted for 15% of the loan business, whilst there’s also going to be direct investment when it comes to ownership of commercial buildings.
With the region – and especially Dubai – putting a lot of stake in building more residential property and growing home ownership, there is a risk that any sudden dip in the underlying market could translate into lower valuations. However, looking at the longer term performance, the likes of Emirates NBD have survived market shocks in the past, with the bank losing almost 50% of its value at the start of the COVID pandemic, but the share price has gone on to treble since then.
A sophisticated banking system is needed to underpin both commercial and retail growth in the UAE. The high profile local banks continue to flourish, but for those looking to invest, ensure there’s a reasonable level of secondary market liquidity and be aware that sentiment can prove punishing to valuations.
If you want to trade stocks in the UAE you can do so with a one of these UAE stock brokers:
| UAE Stock Broker | Stocks Available | Customer Reviews | More Info |
|---|---|---|---|
 | 5,000 | (Based on 16 reviews)
| See Platform |
 | 2,000 | (Based on 144 reviews)
| See Platform |
 | 17,000 | (Based on 678 reviews)
| See Platform |
 | 12,000 | (Based on 148 reviews)
| See Platform |
 | 9,000 | (Based on 73 reviews)
| See Platform |
 | 1,200 | (Based on 86 reviews)
| See Platform |
Tony Cross is a seasoned market commentator with over 15 years of experience, delivering engaging and insightful content for both journalists and investors. Specializing in macroeconomics, UK blue-chip equities, and intermarket analysis, his commentary is highly valued for its clarity and its knack for eliminating unnecessary jargon.
You can contact Tony on tony@goodmoneyguide.com
