Big increase in deposits reduces LTD gap to Dh13.6bn

Substantial increase in deposits and slight drop in loans and advances helped UAE banks to reduce loan-to-deposit gap by Dh13.6 billion ($3.7bn) to Dh26.6bn in July 2010 from Dh40.2bn in the previous month, according to figures released by Central Bank on Tuesday.

Deposits with the banks jumped to close to Dh1 trillion in July, the highest since November 2009 when deposits actually crossed Dh1 trillion mark. Deposits totalled Dh998.9bn in July 2010 against Dh985.4bn in the previous month, an increase of 1.37 per cent or Dh13.5bn.

Loans and advances remained nearly static, dipping to Dh1, 025.5bn in July from Dh1,025.6bn in the previous month. Personal loans rose Dh2bn to Dh215.1bn last month while Letters of Credit fell Dh3.2bn to Dh107.6bn.

General provisions by the UAE banks increased 7.7 per cent in July to Dh14bn from Dh13bn from the previous, the biggest month-on-month jump since December 2009, according to Central Bank figures.

This is significant given the fact that the general provisions witnessed a month-on-month drop of about Dh600 million. Specific provisions for non-performing loans increased month-on-month in July to Dh37.3bn, an increase of Dh300m.

Bank assets maintained their upward growth for the third consecutive month in July. Total assets increased Dh14.5bn, or one per cent, to Dh1, 554.4bn in July 2010 from Dh1, 538.8bn in the previous month; while year-on-year increase of 3.9 per cent or Dh58bn.

Certificates of deposits held by UAE banks reversed the decline in July by increasing Dh6.5bn to Dh74bn in July.

The Central Bank data showed that M1 money supply, which includes currency in circulation and monetary deposits, slowed to an annual 5.3 per cent growth rate in July from 6.3 per cent in the previous month. While M2 money supply, which includes M1 and quasi monetary deposits, grew 5.2 per cent last month compared with 5.4 per cent in June.

M3 money growth, which consists of M2 and government deposits, dipped to two per cent from 2.1 per cent.

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