UAE banks appear to be still maintaining a cautious lending policy they adopted in the wake of the 2008 financial distress as their credit to the government expanded by nearly AED9 billion in the first four months of 2012.
In contrast, loans to the private sector dipped by about AED5 billion in the same period to extend a trend of slow credit growth since the global crisis. Central Bank figures showed total credit extended by the 51 banks in the second largest Arab economy grew by just around 0.8 per cent in the first five months of 2012, a fraction of loan growth during the boom years before the crisis.
From around AED788 billion at the end of 2011, total loans provided by the 23 national banks and 28 foreign units edged up to nearly AED794.4 billion at the end of May, the Central Bank said in its May statistics bulletin.Slackening credit to the private sector was offset by an increase in loans to the government by around 8.8 per cent from AED102.3 billion to AED111.4 billion. Credit to the public sector grew slightly from about AED112.4 billion to AED114.4 billion while loans to the private sector fell to about AED568.4 billion from AED573.2 billion in the same period, according to the report.
It showed the decline was mostly in loans to business and industrial establishments as they shrank to around AED316.9 billion from AED325.1 billion.Credit to financial institutions edged up to nearly AED47.5 billion from AED46.2 billion while personal loans for business and consumption purposes rose to about AED202.9 billion from AED200.7 billion. Domestic credit began to slow down sharply after the 2008 crisis and ensuing debt default problems in the region.
Credit growth stood at around two per cent in 2011 while it was negative in 2010 and nearly 1.9 per cent in 2009.Growth was as high as 39.5 per cent in 2008 and nearly 38.5 per cent in 2007, when banks recorded one of their best financial periods. UAE banks boosted their net income by nearly 18 per cent to AED26.6 billion in 2011 from AED22.5 billion in 2010 mainly because of higher net interest margins and a decline in interest and other expenses.