Central Bank cuts deposits by 48%

The central bank slashed its deposits with banks abroad by nearly 48 per cent in 2010 but the cut was more than offset by a 64 per cent surge in foreign securities investment, its figures have shown.

The surge in investments in held to maturity foreign securities pushed up the central bank’s total assets by around 12.3 per cent to their highest level since the end of 2007, the central bank’s balance sheet showed.

From around Dh81.8 billion in January, its deposits with foreign banks tumbled to nearly Dh44.5bn at the end of 2010, one of their lowest levels. The deposits had soared to a record high of around Dh184bn at the end of 2007 before they began their rapid decline to reach nearly Dh85bn at the end of 2009.

They seesawed through 2010 but ended the year at a low level.

The fall was offset by a surge in the bank’s investment in held to maturity investments, which are held at amortized cost and are not affected by market swings. From around Dh106bn at the end of 2009, such investments rocketed to nearly Dh175.1bn at the end of 2010, their highest level since the end of 2007, when they peaked at about Dh184bn.

The balance showed did not elaborate on such changes but the central bank has often said it follows a policy of investment diversification for lower risk and higher profits. Its loans and advances also plunged by around 78.9 per cent to Dh1.4bn by the end of 2010 from Dh3.5bn in January.

Other assets, which were not classified, shot up by 258 per cent to Dh997 million from around Dh278 million during the same period.

The report showed the bank’s total assets gained nearly Dh25bn to reach Dh228.9bn at the end of 2010 from Dh203.9bn at the end of 2009.

The balance sheet did not mention the bank’s foreign assets but at the end of September, they climbed to nearly Dh110bn.
 
Growth in the foreign assets was the largest in more than a year and their level was the highest since the end of 2008, when they stood at Dh113bn.

But they remained far below their peak of Dh285bn at the end of 2007.  Their decline in the following years was a result of a Central Bank decision to inject massive funds into the local banking sector which it was jolted by the 2008 global financial distress following a three-year boom.

The slump in foreign assets in 2008 depressed the Central Bank’s investment income by more than 33 per cent in 2008 but the fall was offset by a sharp decline in its interest expenses, according to the central bank.

From around Dh2.308bn in 2007, the Central Bank’s investment income plunged to nearly Dh1.538bn in 2008, a decline of 33.3 per cent. In a statement before the end of 2010, the central bank expected its income to rebound sharply during 2010-2011 after a fall of more than 14 per cent in 2009.

Its figures showed the profits could surge from around Dh3.18bn in 2009 to nearly Dh3.67 billion in 2010 and Dh3.7bn in 2011.

Total revenue for 2011 was put at about Dh4.8bn while expenses were projected at Dh1.11bn, including interest on certificates of deposits.

A sharp fall in interest income depressed the central bank’s net profits by 14.4 per cent in 2009 but its investment income more than doubled through the year.

From Dh3.722bn in 2008, the Central Bank’s net income dipped to Dh3.184bn in 2009, the central bank said Bank said in its 2009 report. 

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