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28 March 2024

Bank credit slips after surge in Sept

Published
By Staff

Bank credit slipped by around Dh2 billion in October after leaping by nearly Dh19 billion in September, indicating banks operating in the UAE are still risk-averse despite a strong recovery in the domestic economy.

Credit tightness by the country’s 23 national banks and 28 foreign units was reflected in an increase in allocations for bad debt provisions, which picked up by around Dh1.5 billion in October compared with Dh1.2bn in September.

The Central Bank figures showed deposited also declined while certificates of deposits (CDs) maintained their downward trend for the sixth month.

From around Dh1,075.2bn at the end of September, total credit provided by the 51 banks receded to nearly Dh1,073.3bn at the end of October, the Central Bank said in its latest monthly bulletin.

Year-on-year, credit grew by around 3.4 per cent in October compared with around 1.4 per cent a year earlier and more than 30 per cent during 2007-2008.

In September 2011, credit recorded its largest monthly increase in more than a year and one of the largest since the eruption of the global fiscal distress in September 2008 and the ensuing regional debt default crisis.

The Central Bank had given no explanation for the large rise which is in sharp contrast with the tight lending policy adopted by the country’s banks.

Despite the decline in October, personal loans grew to around Dh252.6bn at the end of October from Dh249.8bn at the end of September, maintaining an upward trajectory over the previous three months.

The report showed provisions picked up in October to reach a record high of around Dh51.9 billion at the end of October, registering an increase of around Dh7.3bn in the first 10 months of 2011. Provisions swelled by around Dh13.1bn in 2009 to record one of their largest annual increases as banks stepped up a drive to guard against toxic assets following the crisis.

Following a steady rise in the first four months of 2011, deposits declined to around Dh1,062.8bn at the end of October from Dh1,067.3bn at the end of September after peaking at Dh1,129bn in April.

The banks’ combined assets also shrank to nearly Dh1,670.4bn at the end of October from Dh1,672.1bn at the end of September but maintained their position as having the largest asset base in the Middle East.

The report showed Central Bank CDs held by banks dropped by around 9.6 per cent to Dh80bn from Dh88.5bn in the same period to record their lowest level in more than a year. Islamic CDs held by banks also plunged by nearly 26 per cent to Dh13bn from Dh17.6bn.