UAE banks improve loan-to-deposit ratio

Growth in deposits outpaced lending in most UAE banks resulting in an improved loan-to-deposit ratio for the first quarter, banks' data showed.

Emirates NBD saw its loan-to-deposit ratio improve to 111 per cent in Q1 from 118 per cent at end-2009 while First Gulf Bank's (FGB) saw an improvement from 105 per cent at the end of 2009 to 104 per cent.

Abu Dhabi Islamic Bank's (Adib) customer financing-to-deposit ratio improved to 84 per cent, while Abu Dhabi Commercial Bank (ADCB) recorded an improvement in this ratio from 135 per cent at the end of last year to 130 per cent at the end of first quarter 2010. NBQ also saw an improvement in the loans-to-advances ratio to 110.6 from 112.3 at the end of last year.

Most UAE banks continue to have a loan-to-deposit ratio higher than that prescribed 100 per cent by the UAE Central Bank. As banks restrict their lending and focus more on gathering deposits, the gap between loans and deposits is expected to narrow this year.

According to analysts, banks will need to focus on deposit gathering this year as the ratio for the banks, except Islamic, exceeds 100 per cent.

Emirates NBD's results showed its customer loans at March 31, 2010, declined by one per cent from end-2009 levels to Dh211.9 billion. Customer deposits at the end of first quarter were Dh191.3bn, an increase of six per cent over customer deposit base as at December 31, 2009.

In the case of First Gulf Bank, deposits at Dh89.4bn were 3.5 per cent higher than December 2009. "The growth in deposits versus loans led to the improvement in the loan-to-deposit ratio," it said.

The bank saw its loans increase 3.2 per cent to Dh93.3bn in March 2010 from December 2009.

Adib's customer deposits grew by 28.4 per cent to Dh49.9bn after adjusting Dh2.2bn of deposits that converted into tier two capital at the end of 2009.

The bank's customer financing-to-deposit ratio was 84 per cent, compared to 87.1 per cent at the end of first quarter of 2009.

Customer deposits were Dh49.935bn whereas net customer financing was Dh42bn at the end of the first quarter compared to Dh40.5bn at the end of December 2009.

NBAD recorded a one per cent increase in loans and advances to customers in the quarter compared to December 2009. Customer deposits were Dh114.7bn at the end of the first quarter, 5.4 per cent lower than the fourth quarter of 2009, due to "primarily the Dh5.6bn Ministry of Finance deposits that were transferred to tier two capital during the first quarter of this year".

ADCB saw a 4.4 per cent growth in customer deposits in Q1 compared to December 2009 , outgrowing net customer loans, that were up 0.9 per cent at Dh117bn.

Adib recorded a 21.5 per cent growth in its customer deposits compared to corresponding quarter previous year whereas net customer financing increased 17.3 per cent.

Analysts said banks are expected to remain cautious in lending in 2010, especially for sectors like real estate.

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