Central Bank investments at all time high

Climb to over Dh201bn in August

The UAE Central Bank boosted its fixed-income securities investment to a record high of more than Dh207 billion at the end of August, accounting for nearly 80 per cent of its total assets, according to its latest figures.

Held-to-maturity investments stood at only around Dh43 billion at the end of 2006, surpassed by the Central Bank’s deposits of about Dh57 billion with other banks.

The investments jumped to nearly Dh98 billion at the end of 2007 before slipping to Dh84 billion at the end of 2008 because of the global financial crisis.

But they sharply rebounded to nearly Dh106.7 billion at the end of 2010 and leaped against to Dh171 billion at the end of 2011 as the Central Bank appeared to be concentrating on safe investment at the expense of risky bank deposits, which plummeted to nearly Dh30 billion at the end of that year.

Held-to-maturity investments maintained their rapid growth and gained nearly Dh30 billion in the first eight months to hit a record high of Dh201.7 billion at the end of August, an increase of nearly 17.9 per cent since the end of 2011.

Deposits with other banks grew by about Dhfour billion to Dh34.6 billion at the end of August but they remained as low as 17 per cent of the held-to-maturity investments and around 13.5 per cent of the Central Bank’s total assets.

The surge in those investments boosted the overall assets to around Dh250 billion at the end of August from Dh234 billion at the end of 2011.

In a recent report detailing its investment policy, the Central Bank said it focuses on diversification of markets and tools as well as safe and profitable instruments, mainly held-to-maturity investments, which are non-derivative financial assets with fixed or determinable payments and fixed maturities

Held-to-maturity investments are measured at amortized cost, using the effective interest rate method.  These are reported at amortized cost, therefore they are not affected by swings in the financial markets.

In a statement last year, the Central Bank said it was expected to net around Dh3.47 billion in 2011 and the profits could swell further in 2012.

During a board meeting in late 2011, the Bank projected total revenue at nearly Dh4.322 billion in 2012 and spending at Dh822 million.

“Net profits are projected at Dh3.5 billion in 2012 compared with an expected profit of nearly Dh3.47 billion in 2011,” it said.

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