Bank lending picks up in the third quarter

UAE banks sharply stepped up lending in the third quarter of 2010 after several months of slow domestic credit, taking advantage of the economic recovery and higher deposits, figures by the Central Bank showed on Sunday.

Assets by the country’s 23 national banks and 28 foreign units also gained nearly Dh8.7 billion to swell to their highest ever level and maintain the country’s position as the largest Arab banking base, the report showed.

Credit extended by the 53 banks soared by around Dh13 billion to reach about Dh1,038.4 billion at the end of September from Dh1,025.6 billion at the end of June, the biggest quarterly rise in more than a year.

Analysts said banks appeared buoyed by the improvement in oil prices, a recovery in the domestic economy and a pick up in local projects. But they added a large part of the loans could be extended to government related entities on the grounds banks still seem risk averse towards the private sector.

Despite the surge in the third quarter, credit in general has remained slow as it grew by a meager 1.7 per cent in the year up to September compared with a massive 30 per cent during 2008 and 34 per cent in 2007, when the UAE and other Gulf oil producers were passing through an economic boom.

In contrast, personal loans by the banks grew by only around Dh1.8 billion in the third quarter although they dipped by nearly Dh1.3 billion in September compared with the previous month, according to the Central Bank.

Deposits maintained upward trend they had recorded in the previous four months and swelled to about Dh1,013.3 billion at the end of September from nearly Dh1,004.9 billion at the end of August, an increase of around Dheight billion.

Total assets climbed to a record high of around Dh1,584.3 billion at the end of September after gaining Dh8.7 billion in just one month to maintain the UAE’s status as having the largest banking sector in the Arab world.

The report showed banks are pushing ahead with a drive to bolster their non-performing loans provisions, which rose to around Dh37.8 billion at the end of September from Dh37.2 billion at the end of August.

The banks’ consolidated capital remained almost unchanged at around Dh266 billion while their combined adequacy ratio was as high as 20.4 per cent, nearly double the capital floor set by the Central Bank for local banks.

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