Emerging market bonds

11 August 2026, 02:59 UTC Chief Investment Office GWM Investment Research For investors outside of the US

UAE bank credits: Resilient balance sheets offset margin compression Emerging market bonds Authors: Santosh Bukitgar, CFA, CAIA, Analyst, UBS AG Singapore Branch; Tatiana Boroditskaya, PhD, Analyst, UBS AG London Branch

• Solid operating performance: UAE banks maintained solid operating performance in 1H26 despite a more uncertain environment. Major banks reported mid- to high-single-digit net credit growth, while deposits saw slower growth of low- to mid-single digits. Profitability was supported by credit growth and diversified income base. Mashreq and SIB recorded particularly strong net profit growth of 17% y/y and 15.3% y/y, respectively.

• Management guidance remains broadly supportive of continued growth, although margins are under pressure. ADIB raised its FY26 loan-growth guidance to 18-20% from 12-14% but reduced NIM guidance to 3.70-3.80% from 3.8-4.0%. ENBD maintained guidance for mid-teens loan growth and NIM of 3.10-3.30%. FAB reiterated low- to mid-teens loan growth and margins at Source: Getty Images the top end of 1.80-1.90%. Please note that CIO does not certify compliance with • Sector fundamentals remain supportive, but the Sharia for the sukuk mentioned in this report, but instead outlook is increasingly dependent on the operational relies on the issuers indication of an instrument being environment and funding conditions. Average margins sukuk and its structure. The labeling of instruments as declined by 23bps to 2.69% in 1H26, while asset sukuk in this report should not be construed as implying a quality improved, with the average NPL ratio at 2.19%. CIO view on the veracity of Islamic credentials. However, further deterioration is possible if the Middle East conflict’s economic impact weakens borrowers’ repayment capacity.

• Investors should focus on whether strong capital, liquidity, and deposit franchises can absorb further margin compression and geopolitical risks. We expect UAE banks to reassess their FY26 guidance as they approach the end of 3Q26.

• Geopolitical developments, global macro backdrop, trade tariffs, the oil market outlook, and idiosyncratic factors relevant to individual issuers are key factors to monitor.

UAE banks: Near-term uncertainty, solid balance is to maintain a long-term perspective, focusing on the sheets strength and resilience of UAE banks’ business models, The conflict in the Middle East initially weakened investor favorable sector fundamentals, and the economy’s ability to sentiment and heightened near-term operational and absorb and recover from shocks. financial uncertainty for banks in the United Arab Emirates. In this environment, we believe the most effective approach

This report has been prepared by UBS AG Singapore Branch, UBS AG London Branch. Analyst certification and required disclosures begin on page 9. UBSFS accepts responsibility for the contents of this report. U.S. persons who receive this report and wish to effect any transactions in any security discussed in this report should do so with UBSFS and not UBS AG. Page 1 of 14

Emerging market bonds: For investors outside of the US

UAE banks are supported by robust franchises, structural Figure 1 - UAE banks' asset quality (NPL ratio) sector advantages, and macroeconomic resilience. They Data as of 30 June 2026 operate in markets with high barriers to entry and concentrated pricing power, leading UAE banks to benefit from structurally low funding costs and minimal disruption risk. The sector is dominated by the top three banks that hold a combined market share of about 65%—a position strengthened by major mergers over the past decade. Customer loyalty is anchored by salary-linked primary accounts, ensuring stable and low-cost CASA deposits. Islamic banks maintain a funding advantage through high levels of non-remunerative deposits, reflecting strong demand for Islamic banking. Protective regulatory Source: UBS, 6 August 2026 and licensing frameworks restrict foreign-bank expansion and preserve favorable competitive dynamics. Capital position UAE banks: Looking ahead UAE banks maintain adequate capital buffers…