The latest UAE Central Bank credit sentiment survey offers good tidings for banks and their clients, business and individual. Image Credit: Pixabay

Dubai: The UAE’s credit demand picked up momentum in the first quarter of 2022 in all segments, including business and personal loans, according to a Central Bank credit sentiment survey.

The survey is based on responses by senior credit officers at banks operating in the country to a questionnaire from the central bank. “Growth in business loan demand was consistent with that recorded in the previous quarter and personal loan demand registered its strongest growth since 2014,” said the Central Bank.

Strong fundamentals

While loan supply is driven by abundant liquidity in the banking system and reduced risk perception of banks, loan demand from corporates are supported by rapid improvement in economic growth and job creation.

“March quarter results are indicative of ongoing confidence in the UAE’s post-pandemic economic recovery, supported by strong domestic demand that has persisted through early 2022,” the Bank said.

The Q1-2022 bank results confirmed the rising credit demand and disbursal, as leading UAE banks reported strong loan growth. While FAB recorded 6 per cent overall credit growth in Q1, Emirates NBD reported record growth in retail lending.

Analysts forecast overall credit growth of 5-7 per cent for the year.

Corporate, SME loans

March data show a robust increase in business loan demand. It was most prominent among large firms, with exceptionally strong growth in loan demand in the retail and wholesale trade sector.

The UAE Central Bank credit sentiment survey results suggest a significant increase in credit appetite and demand for business loans across all emirates, with Dubai recording the strongest growth.

Personal loans

The survey results reveal a surge in consumer appetite for credit in the first quarter. The increase in demand was evident across all loan categories in banks’ Q1-2022 results, with strong demand for personal housing and credit cards.

The fundamental factors were the positive housing market outlook, change in customers’ income, and the financial market outlook. An increase in banks and finance companies’ willingness to extend personal loans was also observed, supported by improving asset quality and a change in risk tolerance.

Loan appetite

“Credit appetite and demand for business loans is expected to remain strong and increase further across all sectors,” the study said.

Easing credit conditions

Bans have eased some of the specific terms and conditions on new business loans to firms, relating to levels collateralisation, premiums charged on riskier loans, and noninterest fees as the risk apatite of banks improved.

Same trend was observed in personal and other retail lines of lending.