Dubai: The banking sector in the UAE has reported an eight per cent loan growth for the first nine months of this year and bank lending remains within prudential ratios set by the central bank, said Saeed Abdullah Al Hamiz, Assistant Governor for Banking Supervision at the UAE Central Bank.
“The loan book, on a gross basis, has been increasing by an annual average rate of about 5 per cent during 2010-2013, and by about 8 per cent during the first 9 months of this year, reaching Dh1.38 trillion while bank deposits increased by an average of about 7 per cent and 11 per cent respectively, reaching Dh1.41 trillion. Such indicators support the healthy growth of the banking sector,” Al Hamiz said in an address to Middle East Banking Forum in Dubai on Monday.
The UAE banking sector, the largest in the region posted an asset growth of 10 per cent for the first nine months of this year to Dh2.31 trillion. Banking sector ssets increased by an annual average of about 6 per cent during 2010-2013.
“Bank lending remains within prudent limits set by the central bank, with the ratio of loans and advances to stable resources of banks reaching 86 per cent,” Al Hamiz.
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 growth in credit to residents was a meagre 2.3 per cent annually, well below the 13.2 per cent average nominal yearly GDP growth rate during that period.
From last year, there were visible signs of a revival in UAE banks’ loan portfolios. Credit rating agency Standard & Poor’s expect UAE loan growth for this year and next year in the range of 10 to 12 per cent.
Gross year-on-year bank lending growth in the UAE climbed to 8.6 per cent in September from 7.2 per cent in August, according to the latest central bank data.
Within the context of loan growth in the UAE, the central bank deputy governor called on banks to enhance their share of lending to small and medium enterprises (SMEs). “According to data we collected from banks, SMEs’ share in total bank lending in the UAE is only 3.2 per cent compared with 8 per cent in the MENA region and 18 per cent in emerging markets,” he said. He also urged SMEs to be more transparent and provide credible accounts and financial statements so they can gain the trust and confidence of banks, to increase their access to credit at a lower cost.
Commenting on the digitisation of the UAE banking sector the Central Bank deputy governor said, the apex bank is working closely with the UAE Banks Federation to review mobile payment facilities within the UAE.
“We seek to ensure that this function is carried out securely within a well regulated framework that promotes innovation. The Central Bank has a crucial role to play in this area and we are seeking to assist the industry in adjusting to current developments and ensuring that the way forward is based on new technologies, financial inclusion and consumer protection,” said Al Hamiz.