UAE domestic credit picked up in 2011 as banks took advantage of strong public demand and a business upturn to ease curbs on lending, according to official data.
Lending by the country’s 23 national banks and 28 foreign units increased year-on-year by around 3.8 per cent through 2011 compared with only 1.3 per cent in 2010.
But growth remained a tiny fraction of the credit boom years of 2007 and most of 2008, when lending leaped by at least 30 per cent.
Analysts said that despite the increase in 2011, credit remained dormant compared with other Gulf states, mainly Saudi Arabia, where lending rebounded by nearly 10 per cent last year.
“Banks in the UAE are still risk-averse and selective but they are gradually relaxing that policy,” an economist at a bank said.
Slow credit growth allied with a surge in bad debt provisions to stifle banks’ profits following the 2008 global fiscal crisis and the ensuing debt default problems in the region in 2009.
But balance sheets for 2011 showed national banks are recovering, as they recorded one of their best financial years, with their net profits jumping by about 50 per cent to Dh21.2 billion.
The figures by the Central Bank showed deposits with the country’s 51 banks grew by around 1.9 per cent to Dh1,069 billion at the end of 2011 from Dh1,049 billion at the end of 2010.
Total assets swelled by 3.5 per cent to Dh1,662 billion from Dh1,605 billion in the same period, allowing UAE banks to maintain their position as having the largest asset base in the Middle East.
In its bulletin, the Central Bank said its assets dipped by around Dh40 billion to Dh234.2 billion at the end of December 2011 from Dh273.4 billion at the November 2011.
The decline was in both deposits which dipped to Dh30 billion from Dh73 billion and in held-to-maturity investments which slumped to around Dh171 billion from Dh192.7 billion.