UAE banks boost foreign deposits

UAE banks boosted their deposits abroad by more than Dh18 billion during the first four months of 2010 as they sought to offset a sharp slowdown in their domestic credit, according to official data.

From around Dh55.5 billion at the end of 2009, the combined demand and time deposits of the country’s 51 banks surged to Dh74.02 billion at the end of April, showed the figures by the Central Bank.

The increase lifted the banks’ total foreign assets to one of their highest levels of around Dh215 billion at the end of April from Dh208.1 billion at the end of 2009.
The bulk of the increase in their foreign deposits was in April, when they jumped by nearly Dh14 billion, the figures showed.

In March, the banks also boosted their investment with foreign banks by nearly Dh12 billion, with their money at call and short notice soaring to around Dh15.1 billion at the end of the month from Dh2.9 billion at the end of February.

UAE banks have stepped up a drive to invest in global banks to counter a steep decline in their domestic lending because of the global fiscal distress and the exposure of many of them to regional debt defaulting institutions.

After jumping by more than 30 per cent in 2008, credit extended by the UAE’s 23 national banks and 28 foreign units edged up by only around 1.9 per cent in 2009. Growth was negative in the first four months of 2010 as total credit slumped to nearly Dh783.7 billion at the end of April.

The figures showed the private sector was the main victim of the slowdown as banks appear to have become risk averse towards this sector while most companies have remained reluctant to seek large long-term loans.

From around Dh607 billion at the end of 2009, credit to the private sector dropped to nearly Dh603 billion at the end of April.

But credit to the government and other public sector establishments edged up to Dh92.4 billion from Dh91.8 billion while it had leaped by nearly Dh18 billion through 2009.

Tight lending at home allied with a sharp increase in loan loss provisions depressed the net income of national banks by more than 20 per cent to around Dh14.87 billion in 2009 from about Dh18.7 billion in 2008.

Despite the increase in the banks’ foreign deposits, the UAE’s net foreign assets shrank to around Dh36.7 billion at the end of April from Dh46.9 billion at the end of 2009 mainly because of a rise in their foreign liabilities and a decrease in the Central Bank’s foreign assets to Dh79 billion from Dh89.8 billion.

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