Dubai: Banks and financial institutions in the UAE expect a further pick in credit demand and loan off-take in the fourth quarter of 2019 according to the third quarter Credit Sentiment Survey of the Central Bank of UAE (CBUAE).
The Credit Sentiment Survey is a quarterly publication of the CBUAE, which collects information from senior credit officers from all banks and financial institutions extending credit within the UAE. The information collected constitutes qualitative responses to a series of questions relating to credit conditions in the most recent quarter and expectations for the upcoming quarter.
The latest survey results for the third quarter revealed a mild increase in appetite for business loans coupled with a tightening of credit standards. Demand appetite for personal loans, has increased moderately, although credit standards remained unchanged.
In terms of outlook, survey respondents are expecting an increase in the demand appetite for both business and personal loans, with a continuous tightening in credit standards.
With respect to specific terms and conditions, survey results suggested a tightening that occurred across the board, most evidently related to terms and conditions pertaining to collateralisation requirements and premiums charged on riskier loans.
The survey results showed a modest increase in demand for business loans in the third quarter. By Emirates, Dubai and Abu Dhabi witnessed an increase in demand appetite for business loans, while Northern Emirates witnessed a decline.
In terms of credit standards, 76 per cent of survey respondents reported no change at the aggregate level. However, the survey results showed in some segments of business lending there were indeed a stronger tightening of credit standards for small and medium enterprises relative to large firms.
The increase in demand for loans was most significant among local and large firms, government related entities, and conventional loans. Non-resident, expat, and Islamic finance also increased but marginally.
For the fourth quarter of the year, survey respondents were optimistic and anticipated demand for business loans to increase across all emirates and firms.
In terms of credit availability, survey respondents also expected further tightening in credit standards and across all terms and conditions but to a lesser extent.
Loans to Individuals
In the third quarter of 2019, the survey showed, demand for personal loans, in aggregate, increased slightly.
The increase in demand for personal loans was attributable to the strengthening demand in Northern Emirates and Dubai, while it remained unchanged in Abu Dhabi. While factors such as change in income, housing market outlook, and seasonal influences impacted retail loan demand, a marginal tightening of credit standards impacted credit availability.
For the third quarter of the year, the survey results showed a marginal tightening in fees and charges and maximum loan-to-value (LTV), while maximum loan-to income (LTI) eased marginally. With respect to the expectations for the December quarter, bankers expect that terms and conditions pertaining to fees & charges to continue tightening marginally, while maximum LTV, and maximum LTI to ease marginally.
Survey results for December quarter revealed a further increase in demand across all categories with the exception of car loans. In terms of credit availability, survey respondents also expected further tightening in credit standards and across all terms and conditions.