The UAE banking industry has emerged as the largest banking industry in the Middle East due to strong economic growth, growing loan segment and strong government support.
As per EFG-Hermes, an investment bank in the Middle East and North Africa region, the UAE banking industry became the largest banking sector in the Middle East with total assets worth Dh 1210 Billion ($336 Billion) from November 2006 to April 2008. Following it, the Saudi Arabia banking industry with total assets worth $290 Billion during the same period, as reported by Menafn.
The UAE banking industry combined profit increased by above 25% to reach Dh 24.8 Billion ($6.75 Billion) in 2007 against Dh 19.4 Billion ($5.28 Billion) in 2006, indicating industry’s strong performance last year. Moreover, the total deposits in the UAE banking industry rose 21.5% to reach Dh 675 Billion ($183.78 Billion) in 2007 from Dh 555 Billion ($151 Billion) in 2006 while liabilities and asset increased by 23% to Dh 1.55 Trillion ($0.42 Trillion) in 2007 compared to Dh 852 Billion ($231.97 Billion) in 2006.
The industry experts believe that the current economic environment, high Gross Domestic Product Growth (GDP) and increasing government spending together boosting growth in the UAE banking industry. The strengthening UAE government financial position is seen on the balance sheet of UAE banking industry through rising government deposits. As a result, the liquidity in the system has increased and private sector can easily take money from banks, ultimately increased the total asset in UAE banking industry.
Moreover, the UAE banking industry has seen rise in loan segment due to upsurge in domestic demand spreading across the whole industrial spectrum. Corporate credit is expected to give the biggest boost to UAE banking industry in medium term as a big proportion of it goes to infrastructure development and industrial expansion in the country. Also, the modification in the mortgage financing laws is supporting growth in the loan segment of banking industry.
According to a Research Analyst at RNCOS, “The favorable economic conditions in the UAE driving growth in its banking industry. High growth in corporate credit and loan segment of the UAE banking industry are enabling companies both domestic and foreign to grow, which in turn boosting growth in the country’s economy. Moreover, the growing economy would create more growth opportunities for UAE banking industry.”
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