Mashreq Bank

1. Company Overview & Earnings Context

Mashreqbank PSC is a Dubai-based banking group incorporated in 1967. The Group operates across retail, commercial, investment and Islamic banking, brokerage and asset management, with operations spanning the UAE, Oman, Bahrain, Kuwait, Egypt, Hong Kong, India, Qatar, the UK and the US. Its subsidiaries include Sukoon Insurance, Mashreq Securities, Mashreq Capital, Mashreq Global Network and Mashreq Bank Pakistan, among others.

The financial statements cover the nine months ended 30 September 2026. 

The period was characterized by strong balance-sheet expansion and double-digit earnings growth. Total assets increased 21.2% from December 2025, while customer lending expanded strongly. Profit attributable to shareholders increased approximately 17.7% YoY, helped by higher net interest income, investment income and other income, as well as a swing from a net impairment charge to a net impairment reversal.

The statements were prepared under IAS 34 Interim Financial Reporting. New IFRS amendments applicable in 2026 had no material impact, while the Group is assessing IFRS 18 ahead of its effective date of 1 January 2027. 

Deloitte & Touche (M.E.) reviewed the interim financial information under ISRE 2410 and issued an unmodified review conclusion. The report was signed by Firas Anabtawi, Registration No. 5482, on 29 October 2026. 

2. Financial Performance Snapshot

9M 2026 vs. 9M 2025

• Total interest + Islamic financing income: AED 13.926bn vs. AED 11.758bn (+18.4%)

• Net interest & Islamic income: AED 6.518bn vs. AED 6.080bn (+7.2%)

• Net fee & commission income: AED 1.076bn vs. AED 1.032bn (+4.3%)

• Net investment income: AED 598.5m vs. AED 311.3m (+92.3%)

• Other income: AED 2.218bn vs. AED 1.966bn (+12.8%)

• Operating income: AED 10.411bn vs. AED 9.389bn (+10.9%)

• G&A expenses: AED 3.267bn vs. AED 2.882bn (+13.4%)

• Operating profit before impairment: AED 7.143bn vs. AED 6.508bn (+9.8%)

• Net impairment: AED 115.8m reversal vs. AED 365.7m charge

• Profit before tax: AED 7.259bn vs. AED 6.142bn (+18.2%)

• Net profit: AED 6.122bn vs. AED 5.181bn (+18.2%)

• Profit attributable to owners: AED 5.988bn vs. AED 5.089bn (+17.7%)

• EPS: AED 28.77 vs. AED 24.57 (+17.1%)

Underlying performance was strong. Operating income grew around 11%, although operating expenses increased somewhat faster at 13%. The major additional earnings boost came from credit costs: Mashreq moved from a AED 365.7m impairment charge to a AED 115.8m net reversal, producing a roughly AED 481m YoY swing.

Investment income was another meaningful contributor, almost doubling to AED 598.5m.

Q3 2026 vs. Q3 2025

Q3 showed continued earnings momentum:

• Operating income: AED 3.584bn vs. AED 3.202bn (+11.9%)

• Operating profit before impairment: AED 2.461bn vs. AED 2.187bn (+12.5%)

• Impairment charge: AED 6.6m vs. AED 120.9m

• PBT: AED 2.454bn vs. AED 2.066bn (+18.8%)

• Net profit: AED 2.074bn vs. AED 1.708bn (+21.4%)

• Profit attributable to owners: AED 2.033bn vs. AED 1.685bn (+20.7%)

• EPS: AED 9.61 vs. AED 8.16

Q3 was therefore stronger than the nine-month run rate in terms of net-profit growth, while impairment charges remained very low.

3. Operating Performance & Major Programs

Mashreq reports four principal operating segments:

• Wholesale: corporate/commercial banking, financial institutions and international corporate banking.

• Retail: individuals and small businesses, including deposits, personal/mortgage/business loans, cards, SME/private banking and wealth management.

• Treasury & Global Markets: FX, derivatives, fixed income, structured credit, trading, ALM and capital-market activities.

• Insurance & Others: primarily Sukoon Insurance plus centrally managed strategic businesses and investments.

The banking franchise expanded substantially during 2026.

Lending Growth

Conventional loans and advances to customers increased to AED 161.465bn from AED 138.071bn, representing approximately 16.9% YTD growth.

Islamic financing and investment products increased to AED 29.153bn from AED 26.278bn, or approximately 10.9%.

Combined conventional and Islamic customer financing therefore reached approximately AED 190.6bn, up from AED 164.3bn at FY2025.

Gross customer exposure including Islamic financing increased to AED 193.570bn from AED 166.901bn, driven primarily by approximately AED 26.8bn of net new financial assets and repayments. 

Deposit Franchise

Funding growth was also substantial:

• Conventional customer deposits: AED 197.376bn, +10.3% YTD

• Islamic customer deposits: AED 39.714bn, +52.7%

• Combined customer deposits: approximately AED 237.1bn, versus AED 204.9bn at FY2025

Importantly, combined deposit growth of approximately 15.7% was slightly below combined customer financing growth of roughly 16%, so funding growth broadly kept pace with the strong expansion in lending.

Investment Portfolio Expansion

Mashreq also materially increased its securities portfolio:

• Financial assets at fair value: AED 30.718bn vs. AED 21.457bn

• Securities at amortised cost: AED 52.680bn vs. AED 28.906bn

This investment-book expansion contributed to the 92% increase in net investment income, but also increased balance-sheet deployment materially.

4. Key Performance Drivers

1. Strong Balance-Sheet Growth

Total assets reached AED 405.55bn, compared with AED 334.63bn at FY2025 — an increase of approximately 21.2% in nine months.

Growth was broad-based across customer loans, Islamic financing, securities and central-bank balances. 

This expansion is the primary structural driver behind the higher interest and Islamic financing income.

2. Higher Funding Costs Partly Offset Asset Growth

Total interest and Islamic financing income increased 18.4%, but:

• Interest expense increased 27.2% to AED 6.698bn.

• Islamic depositor distributions increased 72.1% to AED 710.7m.

Consequently, net interest and Islamic income grew a more moderate 7.2%.

This is an important earnings-quality point: asset growth was very strong, but the benefit to net interest income was partly absorbed by the rising cost of funding.

3. Diversified Non-Interest Revenue

Non-interest revenue was supportive.

Net investment income almost doubled to AED 598.5m, while other income increased 12.8% to AED 2.218bn.

Net fee and commission income increased more modestly by 4.3%, because gross fee income growth was partly offset by higher fee and commission expenses.

Overall, Mashreq's revenue growth was not solely dependent on lending.

4. Credit Costs Provided a Major Tailwind

Net impairment shifted from a AED 365.7m charge in 9M 2025 to a AED 115.8m reversal in 9M 2026.

This materially explains why PBT grew 18.2% despite pre-impairment operating profit growing 9.8%.

However, the underlying ECL data deserve monitoring. Total loss allowance against customer loans and Islamic financing increased to approximately AED 2.952bn from AED 2.552bn at FY2025. Stage 2 ECL increased to AED 536.9m from AED 310.7m, while Stage 1 ECL increased to AED 939.8m from AED 735.9m. Stage 3 ECL declined slightly to AED 1.475bn. 

Stage 3 gross exposure also improved to AED 1.918bn from AED 2.072bn, which is positive, but Stage 2 gross exposure increased to AED 4.453bn from AED 3.911bn. 

5. Operating Expenses Grew Faster Than Revenue

G&A increased 13.4%, versus operating-income growth of 10.9%.

As a result, the simple cost-to-income ratio based on reported G&A/operating income increased slightly to approximately 31.4% from 30.7%.

This is not a major deterioration, but expense growth is worth monitoring if revenue growth normalizes.

5. Balance Sheet, Backlog & Cash Flow

Balance Sheet

At 30 September 2026:

• Total Assets: AED 405.550bn vs. AED 334.634bn

• Conventional Customer Loans: AED 161.465bn vs. AED 138.071bn

• Islamic Financing: AED 29.153bn vs. AED 26.278bn

• Customer Deposits: AED 197.376bn vs. AED 178.891bn

• Islamic Customer Deposits: AED 39.714bn vs. AED 26.004bn

• Borrowings: AED 22.149bn vs. AED 13.474bn

• Repurchase Agreements: AED 29.719bn vs. AED 7.136bn

• Total Equity: AED 47.281bn vs. AED 40.577bn

• Equity attributable to owners including noteholders: AED 45.966bn vs. AED 39.374bn

The balance sheet therefore expanded rapidly, but this was accompanied by a notable increase in wholesale funding. Repo funding increased by approximately AED 22.6bn, while borrowings rose approximately AED 8.7bn.

Capital Strengthening

Tier 1 capital notes increased to AED 6.611bn from AED 2.938bn, following the issuance of AED 3.673bn of additional Tier 1 capital during 2026.

The additional AT1 issuance strengthened the capital base and helped support the substantial growth in risk assets. 

Cash Flow

Bank cash-flow statements need to be interpreted differently from industrial companies because customer loans, deposits, securities and interbank balances are core operating activities.

For 9M 2026:

• Net operating cash flow: AED +19.585bn vs. AED 951m outflow

• Net investing cash flow: AED -24.958bn vs. AED 8.692bn outflow

• Net financing cash flow: AED +10.045bn vs. AED 2.062bn outflow

• Ending cash & cash equivalents: AED 36.298bn vs. AED 27.220bn

The operating cash inflow was supported by strong deposit growth and AED 22.6bn growth in repo funding, partly offset by approximately AED 23.2bn deployed into conventional customer lending and AED 3.0bn into Islamic financing.

Investing cash outflow largely reflects substantial purchases of financial assets.

Financing cash flow benefited from:

• AED 9.248bn medium-term notes issued

• AED 3.673bn Tier 1 capital issued

• AED 625.8m bilateral borrowings

while AED 2.087bn of dividends were paid.

Backlog / Forward Visibility

A conventional backlog is not applicable to a banking group.

For Mashreq, forward indicators are instead the size and quality of the customer lending portfolio, deposit franchise, undrawn credit commitments, trade-finance exposures and investment portfolio.

The most relevant current indicator is the very strong balance-sheet expansion: customer financing increased by approximately AED 26bn during the first nine months, while combined customer deposits increased by approximately AED 32bn.

6. Investor Takeaway

Mashreq delivered a strong 9M 2026 result, combining approximately 11% operating-income growth with 18% net-profit growth and more than 20% YTD asset growth.

The underlying franchise is expanding rapidly. Conventional and Islamic customer financing reached approximately AED 190.6bn, while combined customer deposits reached approximately AED 237.1bn. This indicates that the lending expansion has been accompanied by substantial deposit mobilization rather than being funded solely through capital-market borrowings.

Earnings quality is broadly positive but requires some differentiation. Pre-impairment operating profit increased approximately 9.8%, considerably below the 18.2% increase in PBT. The difference is largely explained by the favorable AED 481m YoY swing in net impairment. Therefore, the headline profit growth rate somewhat overstates the growth in underlying pre-provision operating earnings.

There are also clear positives in credit quality: gross Stage 3 exposure declined from AED 2.07bn to AED 1.92bn. However, Stage 2 exposures and Stage 1/2 ECL allowances increased, so asset-quality trends should continue to be monitored given the rapid loan-book expansion.

Funding is another key area. Customer deposits expanded strongly, especially Islamic deposits, but the bank also materially increased repo funding, borrowings and medium-term note issuance. Interest expense consequently increased faster than interest income, restricting net interest and Islamic income growth to 7.2% despite very strong asset growth.

Capital was proactively strengthened through the AED 3.673bn Tier 1 issuance, helping total equity increase to AED 47.3bn and providing support for the enlarged balance sheet.

For investors, the main monitoring points are therefore net interest margin/funding costs, sustainability of rapid loan growth, Stage 2 credit migration and ECL, operating-cost growth, dependence on wholesale/repo funding, and whether the favorable impairment environment persists.

Overall, Mashreq's 9M 2026 results show a fast-growing and increasingly diversified banking franchise with strong profitability, substantial deposit growth and improved headline credit costs. The main question for future periods is whether the bank can translate its exceptional balance-sheet expansion into sustained pre-provision earnings growth without a corresponding increase in funding costs or credit risk.

Deloitte's unmodified IAS 34 review conclusion provides additional assurance over the interim financial reporting.