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- Dubai 04:14 05:35 12:18 15:44 18:56 20:17
The deposits have gone up by Dh41.4bn in the past 12 months while loans and advances (net of provisions) extended by UAE banks have gone up by Dh20.5bn in the same period. (FILE)
In a significant milestone, UAE bank deposits grew to over Dh1 trillion in August for the first time since November last year, underlining the improving ratios of the local banking sector.
Bank deposits now are at their highest level ever, according to Central Bank estimates. They now stand at Dh1.005trn, compared with the earlier high of Dh1.003trn made in November 2009.
In a clear sign that banks are serious about maintaining their loan-to-deposits ratio, the deposits have gone up by Dh41.4bn in the past 12 months while the loans and advances (net of provisions) extended by UAE banks have gone up by Dh20.5bn, or less than half the deposits growth, in the same period.
In a sign of improved lender confidence, UAE banks are seen offering more loans to individuals, with personal loans offered by banks up more than Dh1bn in a month, from Dh215.2bn in July to Dh216.2bn in August 2010.
The liquidity support facility extended by the Central bank has boosted the banks’ operational ability but according to Central Bank statistics, banks are using less of the facility now (Dh1.9b in August 2010) than they were in December 2009 (Dh2.4b), closer to when the facility was first offered.
The capital adequacy ratios of UAE banks have improved remarkably since December 2008, when it stood at 13.3 per cent to 20.4 per cent in June 2010.
In a turnaround that could set the tone for future bank profitability, UAE banks saw their provisions for non-performing loans decline month-on-month in August for the first time in four months, according to Central Bank data.
Although the decline is marginal, from Dh37.3 billion in July 2010 to Dh37.2bn in August, this is the first time that the provisions have stopped their upward march in more than a quarter, suggesting that the tide for bad loan provisions may have turned.
Provisions for NPLs, which were at Dh19.7bn in December 2008, rose to the current levels due to the impact of the ongoing global economic turmoil on the local real estate and banking sector, leading local banks to make huge provisions for defaults. At the same time, general provisions for August remained at the same level as in July, at Dh14bn.
UAE bank assets too continued their healthy march upwards in August, going up to Dh 1.58trn, up from Dh1.55trn in July.
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