Abu Dhabi: The UAE Central Bank said total bank assets increased by 7.5 per cent to Dh1.6 trillion at the end of November last year.

"Bank loans and advances increased 0.3 per cent during November and by 2.3 per cent during the first 11 months of 2010. [This] reflects banks' cautiousness and low demand from the private sector," the Central Bank said in a statement yesterday.

"When loans increase, it shows that there is an increase in investments, and this is a sign of a progressive economy," Dr Amjad Hossain, an economist at the UAE University in Al Ain told Gulf News by telephone.

Money Supply M1 (currency in circulation plus monetary deposits) in November remained at the same level as in October at Dh231.4 billion, the Central bank said.

Broad money supply, M2 which comprises M1 plus quasi-monetary deposits, however, decreased to Dh784.6 billion in November from Dh797.4 billion at the end of October 2010 "due to a decrease in quasi-monetary deposits by Dh12.8 billion".

Broader money supply M3 (M2 plus government deposits at the banking sector) also decreased in November from a month earlier. It fell from Dh998.7 billion at the end of October to Dh987.0 billion at the end of November, the Central Bank added.

"The banks are keeping interest rates too high and there are hidden charges on loans that seem to have affected the ability of borrowers.

The decline in M2 and M3 indicates that people are pouring money into higher yielding riskier assets such as shares and government securities instead of placing their money in low yield fixed deposits," said Mohammad Amerah, an Abu Dhabi-based economist.

"For the first 11 months of 2010, the intermediary aggregate M2 increased by 5.9 per cent, which is consistent with current estimates of economic growth and inflation in the UAE," said the apex bank.

$35b net profit likely

Arab banks are expected to post total net profit of $35 billion (Dh128.55 billion) for 2010, Bahrain's Akhbar Al Khaleej newspaper reported yesterday.

The paper quotes the president of the Union of Arab Banks Adnan Yousuf as saying Arab banks will report a growth rate of not less than 15 per cent in their earnings for 2010, mainly due to higher liquidity and better economic conditions during the last quarter of the year.

Yousef told the newspaper that most banks increased their capital in 2010 and this will have a positive impact on lending capabilities this year.