With the UAE economy is growing strongly, its banking sector is enjoying its benefits in the form of increasing deposits from public and industrial concerns and in turn, getting good returns.
The UAE banks registered total profits of Dh25 Billion in 2007, a 28.8% growth over 2006, according to Sultan Nasser Al Suwaidi, Central Bank Governor, as reported by gowealthy on February 4, 2008.
The growth of total deposits was nearly 35% at Dh750 Billion in 2007 from Dh555 Billion in 2006, making 2007 a good year for he UAE banks. There was an increase of 39% in total loans and advances in 2007 from 2006 and 45% in assets and liabilities.
Sustained growth in returns and assets has brought boom time for the UAE banking sector. The increase in returns and assets are indicating a positive macroeconomic backdrop and greater government and private spending on infrastructure, making a ground for concrete growth of the UAE banking sector. In contrast, the UAE banks have been increasing loans and advances to infrastructure development projects and are getting heavy returns in turn.
The solid economic growth in the past few years on the strength of high oil prices and production has been to the advantage of the UAE banks. The relatively low interest rate environment and high oil prices helped banking sector assets grow strongly. As the economy is in growth phase, industrial and public concerns are putting in increasing deposits in the UAE banks.
The Central Bank also contributed to the growth in the UAE banking sector through various ways to improve the business environment, like reviewing and improving the business and financial laws, and bringing in new laws in the economy as and when required by the banking sector. Thus, the UAE banking sector can keep pace with the global banking industry.
As per a Research Analyst at RNCOS, “While the speed of growth of the UAE economy is supporting the banking sector, low interest rate could pose a problem in future. It is therefore necessary for the banking sector to monitor the increasing liability of banks closely. Moreover, the Central Banks has to introduce new laws keeping the best international practices in mind to ensure that banks follow the international standards of banking to become more competitive globally.”
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