Foreign deposits up Dh15bn in H1

Increase boosts banks’ foreign liabilities by Dh18bn

Foreign banks boosted their deposits in the UAE by nearly Dh15 billion in the first half of 2011 as they are cautiously returning to the market because of the local recovery and global turmoil, according to official data.

From around Dh51.5bn at the end of 2010, their deposits with the UAE’s 51 banks swelled to nearly Dh66.2 billion at the end of June, showed the figures published in the Central Bank’s latest monthly bulletin.

Most of the increase was in June as they grew by around Dh9bn after a slight fall in May and fluctuations in the previous three months.

The increase boosted the UAE banks’ total foreign liabilities to around Dh289.7bn at the end of June from Dh271.6bn at the end of 2010.

Their combined foreign assets also rose to nearly Dh260bn from Dh244.6bn in the same period, the report showed. Despite the surge in foreign assets, banks maintained their debtor status as net foreign assets remained negative at Dh29bn at the end of June compared with Dh38bn at the end of 2010.

A breakdown showed foreign banks deposits with the UAE’s 23 national banks and 28 foreign units included around Dh20.5bn in demand deposits at the end of June compared with Dh14.6bn at the end of 2010. Time deposits edged up slightly to nearly Dh45.8bn from Dh44.9bn. 

The deposits by foreign banks had hit an all time high of nearly Dh211bn at the end of April 2008 at the height of speculation that the UAE and other Gulf oil producers would appreciate their currencies against the US dollar.

Speculation began to recede after the UAE Central Bank repeatedly ruled out such plans and came almost to a standstill in 2009 after the country decided to withdraw from the monetary union launched by Saudi Arabia, Kuwait, Qatar and Bahrain. The other GCC member, Oman, also pulled out in late 2007.

The drive by speculators to pull their funds out of the UAE and other Gulf nations gained momentum after the eruption of the 2008 global fiscal crisis as foreign banks struggled to meet commitments and bridge a liquidity gap at home. Despite their increase in June, foreign banks’ deposits remained at one of their lowest levels and were nearly Dh110bn below their level at the end of 2008.

The report showed UAE banks’ deposits with banks abroad grew to around Dh81.2bn at the end of June from Dh76.3bn at the end of 2010.
Investment in foreign securities swelled to about Dh55.6bn from Dh48.4bn while loans soared to nearly Dh7.6bn from Dh62.8bn.

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