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UAE’s credit demand rises in second quarter

Bankers expect further pickup in both business personal loan demand from third quarter

Gulf News

Dubai: Demand for both business loans and personal loans picked up pace in the UAE in the second quarter of this year according to the latest Credit Sentiment Survey of the Central Bank of UAE.

The survey is a quarterly study by the central bank, which collects information from senior credit officers from all banks and financial institutions extending credit within the UAE.

Data from the latest survey shows demand for business loans rose moderately in the second quarter (April-June), while demand for personal loans rebounded slightly after dropping in the previous quarter.

The information collected showed that on a net balance measure (weighted percentage of respondents reporting an increase in demand for loans minus those reporting a fall) for business loans rose to a positive 11.8 points compared to 4.6 in the first quarter.

For the current quarter, respondents expect a further rise to plus 16.3, while they also think credit standards will tighten further, the central bank added.

The survey of credit officers broadly confirms the central bank’s actual credit data for the first six months of this year and loan growth numbers reported by banks in the second quarter.

 The factors that contributed to the change in demand for loans, as per the survey results, were financial markets outlook, change in income, and interest rates.


According to the latest central bank data, the UAE’s gross credit increased by 0.3 per cent from Dh1617.3 billion at the end of May 2018 to Dh1622.3 billion at the end of June 2018.

Domestic credit growth up to May this year had been driven largely by the private corporate (3.4 per cent) and government borrowing (3.5 per cent) segments.

For the June quarter, survey results suggest an increase in demand for business loans across the board.

By loan type, the increase was most significant among large firms and local firms.

In terms of credit standards, more than two-thirds of survey respondents reported no change.

However, in aggregate, a positive net balance measure was observed suggesting a tightening of credit standards during the June quarter.

With respect to specific terms and conditions, survey results indicated a tightening in credit standards that occurred most with respect to premiums charged on riskier loans and collateralisation requirements.

In terms of outlook, demand for business loans is predicted to increase further in the September quarter, although respondents anticipated a further tightening in credit standards and across all terms and conditions.

 

Retail credit

In the second quarter of this year, demand for personal loans in aggregate increased marginally recovering from the decline in demand registered in the previous quarter.

The factors that contributed to the change in demand for loans, as per the survey results, were financial markets outlook, change in income, and interest rates.

In terms of credit availability, more than 85 per cent of survey respondents reported that the credit standards were unchanged.

For the September quarter, the credit standards on aggregate are expected to ease moderately.

The survey respondents expect demand for personal loans to increase with the exception of Northern Emirates, where it is predicted to remain unchanged.

For the second quarter, survey results revealed an increase in personal loans for housing (includes refinancing, renovations), personal and a marginal increase in housing investment, while demand for conventional loans remained unchanged.

On the other hand, demand has decreased for credit card loans, vehicle loans, non-housing investment, and owner-occupier loans.

With respect to expectations for the September quarter, survey respondents expected demand for personal loans to increase further.

By emirate, survey respondents predicted a reversal in demand appetite in Abu Dhabi and a continuous increase in Dubai, while demand from the Northern Emirates was expected to remain unchanged.

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