According to Fitch Ratings, the buoyant operating atmosphere of the UAE banks last year were driven by spiraling oil prices and is expected to continue in 2008.

The leading global credit rating company, Fitch Ratings, declared on May 13, 2008 that the upbeat trend in the performances of UAE’s financial institutions remained in 2007, and is likely to continue in 2008. In spite of 40% growth in loan sector in 2007 and robust growth in past years, asset quality was good in 2007. In 2007, majority of the banks boasted double-digit growth in operating income, as reported by AMEinfo.

Fitch Ratings declared that nearly all the UAE banks adopted the idea of ‘universal banking’ to extend a complete array of banking services from one point to clients. The banking sector of the UAE is the biggest in the Gulf Cooperation Council (GCC) in terms of assets, and has the greatest level of intermediation in the GCC concerning assets, deposits and loans.

As per the industry analysts, the banking sector of the UAE keeps enjoying a positive working atmosphere in 2008, predominantly impelled by soaring oil prices giving rise to larger government infrastructure expenditure and universal hike in retail as well as corporate lending.

UAE banking sector’s functioning also depends on core banking actions and in view of persistently strong demand for credit, UAE banking sector will grow faster in 2008. UAE’s core banking is founded on steady economic growth, growing financial penetration and viable debt levels.

Moreover, to prevent the sluggish deposit growth from becoming a limiting factor, majority of banks introduced Medium Term Notes (MTN) programs totaling billions of dollars. Several banks are now concentrating on diversifying their revenue flow, and capitalizing on cross-selling prospects. The local banks are also promoting the UAE banking sector. Government’s surplus funds, plus open branch network alternatives are the primary reason for the development of local banks in the UAE.

As per RNCOS’ Research Analyst, “Favorable business environment and economic growth are giving boost to the UAE banking industry. Credit is the core competency of the domestic banks by which they are expanding their operational activities. But the concern for foreign banks needs government’s attention. It will not only give support to the UAE banking industry but also increase the foreign currency stock in the country.”

Related Market Research Reports:
Sharia Banking System in Indonesia
South African Banking Sector Analysis
Bulgaria Banking Sector Analysis