The UAE banks raised their credit by nearly Dh6 Billion in June 2009 on account of the government support and lower non-performing loans.
Thanks to the government plans of guarantying bonds within measures to boost investors' confidence, UAE banks raised their credit by around Dh6 Billion in June 2009, as per the official figures reported in Business24-7.
24 national banks and 28 foreign banks in the UAE increased their investment by Dh5 Billion in the Central Bank's Certificates of Deposits (CDs), reflecting higher liquidity. As a result, the CDs surged to the highest level after September 2008.
The rapid rise in general provisions compared to provisions for non-performing loans implies that although banks are vigilant against the possible default loans, non-performing loans are not growing at the same pace.
The statistics further revealed that despite the global financial crisis and default problem on account of the Saudi Arabia's Algosaibi and Saad groups, the UAE banks continued their growth by focusing on non-performing loan provisions.
Moreover, the banks have been strengthening their balance sheets to offset losses due to default loans taken by individuals and corporate which are heavily hit by the financial meltdown. Although the gap between loan and deposit has halved since January, banks have failed to curb it to a comfortable level. The loan to deposit ratio is higher now but it will improve gradually.
A market research report "Middle East Banking - Corporate Loan a Hot Opportunity" by RNCOS has said that the global financial crisis will have little impact on the industry owing to the conservative investment strategies followed by the banks in the regions. Banks have least exposure to the US financial and property market and other problematic assets.
According to a Research Analyst at RNCOS, "The upsurge in loans is primarily led by the banks' policy of investing in fix and secure instruments such as central bank CDs and support of the federal government. It seems that banks are taking precautions in advance of such plans to boost their lending activities. This conservative approach is expected to pay in coming years and the banking industry is expected to continue its growth."
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