The UAE banks will witness 12 per cent growth in assets during 2010-2014, crossing the $2 trillion mark over the next three years.
According to forecasts by Business Monitor International (BMI), UAE banks’ assets will grow by Dh91 billion or six per cent this year to Dh1.61 trillion compared to Dh1.52 trillion last year. It projected that assets will increase by Dh161bn or ten per cent to Dh1.77 trillion in 2011, Dh1.966 trillion a year later and reach Dh2.2 trillion in 2013.
According to the Central Bank’s October statistics, the UAE banks’ assets totalled Dh1.623 trillion – an increase of 2.5 per cent from the previous month.
The UAE banks have been witnessing poor asset quality over the past two years due to the financial crisis. Ratings agency Standard & Poor’s recently said asset quality is unlikely to improve until 2011.
“We believe the asset quality of Gulf banks should improve from 2011,” said credit analyst Mohamed Damak.
Fitch Ratings said that asset quality ratios of UAE banks deteriorated significantly in 2009 with the average non-performing loan to gross loans ratio for the nine largest banks increasing to 4.3 per cent from 1.7 per cent at end-2008.
Dubai-based Emirates NBD bank, the largest by assets in the Middle East, assets reached Dh284.2 billion at the end third quarter of 2010 compared to Dh281.6 billion at the beginning of the year.
BMI projected that the loan will increase to Dh1, 038 billion while deposits reach Dh1,022 billion this year, thus reducing funding shortfall in the UAE banking system to Dh16.15 billion this year – nearly half of last year’s Dh35.1 billion.
The gap is expected to end this year as deposits will exceed loans. Deposits are likely to grow to Dh1,124 billion against Dh1,121 billion loans, posting liquidity surplus of Dh4 billion. The growth in loans and deposits will continue over the next few years as deposits will increase to Dh1,348 billion in 2013 and loans at Dh1,344 billion.
BMI projects that the UAE banking will again record liquidity shortfall in 2014 when loans-deposit gap will reverse. It projected Dh23 billion shortfall in banking system in 2014 when loans will leap to Dh1,478 billion against Dh1,455 billion deposits.
The Central Bank’s statistics showed that the liquidity shortfall reversed in October when banks’ deposits exceeded loans by Dh16bn.