UAE-based National Bank of Abu Dhabi (NBAD) said government deposits dropped by Dh48 billion ($13 billion) in past 12 months after it reported a three per cent fall in third-quarter profit.

The bank's chief executive Alex Thursby said on Wednesday that the UAE banking system as a whole lost Dh56 billion in government deposits from September 2014 to September 2015.

The outflow highlights the impact of current low oil prices on the UAE's government finances.

The International Monetary Fund in June forecast the UAE's economic growth would slow to three per cent this year, down from 4.6 per cent last year and that the country is set to post its first fiscal deficit since 2009 because of lower oil revenues.

"We do think tightening liquidity will eventually force banks to raise interest rates and will push NBAD to raise rates," Thursby said on a conference call with analysts.

"We will always trade off return for safety in the current uncertain outlook, even if it slows our growth profile," Thursby told reporters.

The UAE's largest bank by assets, NBAD in July, said it did not expect further big outflows of government deposits after these fell by Dh37 billion during the first half of 2015.

Most banks in the region are grappling with margin pressures and liquidity issues as the UAE and other Gulf oil producing states face a squeeze on budgets from lower oil prices.-Reuters