Anything to sustain that consumption boom: UAE lending grows 7%
Bank lending in the UAE grew 7.1 per cent year on year in 2013, according to the latest data from the UAE Central Bank.
Bank loans grew at their fastest pace since the fourth quarter of 2009, reaching 7.1 per cent year on year in December 2013. Loans and advances rose just 0.3 per cent from November on a month on month basis after a big jump in November.
“The acceleration in credit growth through 2013 (average 5.5 per cent, compared with average 2.7 per cent in 2012), provides further evidence of the broader economic expansion in the UAE last year, although private sector credit growth remains lower than in Saudi Arabia and Qatar. We expect private sector credit growth to remain in high single digits this year, and forecast 8 per cent year on year in December 2014,” said Khatija Haque, Head of Mena Research at Emirates NBD.
Key sectors, such as tourism and corporate services, are performing strongly, particularly in Dubai, and a strong rebound in real estate prices over the past 18 months has improved the loan demand in the country.
Banks in the UAE had stopped lending almost completely in 2008-2012 as they shifted their focus to cleaning up their balance sheets and improving their funding profiles. During this period compound average nominal growth in credit to residents was a meagre 2.3 per cent annually. From early last year, there were visible signs of a revival in UAE banks’ loan portfolios.
“We expect the nominal growth of credit to remain at about 10 to 12 per cent in 2014 and 2015. The positive overall trend in employment and the retail sectors should continue to foster banks’ retail loan books,” said Timucin Engin, Associate Director, Financial Services Ratings, Standard & Poor’s Ratings Services.
The UAE’s aggregate bank deposits also rose 9.5 per cent (Dh111.1 billion) year on year in December 2013. Total deposits at the end of the year were Dh1,278.9 billion. On a month on month basis, deposits surged 0.4 per cent in December. According to the central bank figures residents’ deposits were up 13 per cent last year, making it a key driver of overall deposit growth.
Key monetary indicators showed that the overall domestic liquidity continued to improve with broad money supply (M2) up 22.5 per cent for the full year. Quasi money (foreign exchange and long-term dirham deposits) growth accelerated to 20.2 per cent in December, while M1(coins and notes in circulation and other liquid money equivalents) growth slowed to 26.9 per cent in December.
Government deposits continued to decline month on month through the fourth quarter, which is reflected in the slower M3 (M2 plus longer-term time deposits and money market funds with more than 24-hour maturity) growth over the same period. M3 was up 12.6 per cent in 2013 compared to 10.9 per cent in 2012.
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