UAE’s credit demand seen picking up in the third quarter
The aggregate bank credit to the private sector in the UAE has picked up momentum indicating rising business confidence in the country. Image Credit: Supplied

Dubai: The aggregate bank credit to the private sector in the UAE has picked up momentum indicating rising business confidence in the country.

According to the Central Bank of UAE (CBUAE) data, total bank credit in the country continued to report positive growth of 0.3 per cent in September 2021, month on mont to Dh1.77 trillion.

The CBUAE data showed the rise domestic credit (loans within the UAE) was largely driven by a steady rise in bank lending to the private sector.

While the overall lending to the domestic private sector and non-banking financial institutions increased by 0.5 per cent each in September, bank lending to government and government related entities (GREs) declined by 0.3 per cent and 0.9 per cent.

Bankers said a rise in lending to the private sector and a corresponding decline in lending to government and GREs indicate the improving business environment in the country.

While the bank lending is on the steady rise, the central bank data showed a steady rise in banking sector liquidity with total deposits with rising 0.7 per cent, month on month in September to Dh1.94 trillion.

The rise in total bank deposits was largely driven by a 3.7 per cent rise in resident deposits and a 2.9 per cent rise in non-resident deposits as public sector/government deposits took a 5.4 per cent dip in September.

Credit sentiment

The latest credit sentiment survey [a survey of senior credit officers in banks] by the CBUAE for the September quarter showed increased demand for credit, from both businesses and households, in the UAE, coupled with a softening of credit standards [standards used by banks while approving loans] for the household sector.

Business loan demand was especially strong during the quarter, registering the strongest growth since 2014, and reflects ongoing confidence of the corporate sector in the economic recovery.

For the September quarter, survey results suggested that demand for business loans surged further with strongest increase since 2014.

Looking ahead, the survey results showed expectations for business and personal loan demand along with changes in credit standards bode well for credit growth in the current quarter and the first quarter of 2022.

Latest banking sector data also showed retail and consumer credit too are picking up pace. While the improving job creation in the country has prompted banks to ease lending conditions for retail borrowers, factors such as bettter valuations in housing market, the rise in income levels, improving financial market outlook, and prevailing low interest rates are supporting demand for consumer loans.