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05 December 2023

Central bank boosts investment by Dh14 bn

By Nadim Kawach

The UAE Central Bank kept its deposits with other banks relatively low but boosted its investments in the more profitable foreign securities by nearly Dh14 billion in October, its figures showed on Thursday.

From around Dh48.3 billion at the end of September, deposits by the Central Bank, mostly in banks abroad, edged up to about Dh50.1 billion at the end of October but remained at one of their lowest levels.

At the end of June, the deposits were nearly Dh36 billion below their level of Dh85.6 billion at the end of 2009, the central bank said in its October bulletin.

But the report showed there was a sharp rise in the central bank’s investment in held-to-maturity foreign securities, which jumped by around Dh14 billion to nearly Dh58.7 billion at the end of October from Dh44.9 billion at the end of September. The investments in such tools were only about Dh37 million at the end of 2009.

The report showed the Central Bank’s total assets surged to around Dh224.2 billion at the end of October from Dh208.3 billion at the end of September. Foreign assets swelled to Dh110.1 billion from Dh94.5 billion.

Loans to banks against certificates of deposits (CDs) remained unchanged at about Dh1.47 billion while loans to the Ministry of Finance and the Dubai Government stayed at Dh106.7 billion.

Loans to banks under the Dh50-billion liquidity support facility introduced by the Central Bank in the wake of the 2008 global fiscal crisis slipped to Dh1.87 billion at the end of October from Dh1.89 billion at the end of September. It remained much lower than its level of Dh2.63 billion at the end of 2009, an indication the banks are no longer using that facility because of resurging liquidity.

Recovering liquidity is also reflected in high investments by banks in the Central Bank’s CDs, which grew to Dh80.5 billion at the end of October from Dh73 billion at the end of September, according to the bulletin.

In a statement after a board meeting last month, the central bank expected better performance in fiscal 2010-2011 after a 14 per cent fall in profits in 2009.

The statement projected the central bank’s net profits to surge from around Dh3.18 billion in 2009 to nearly Dh3.67 billion in 2010 and Dh3.7 billion in 2011.

Total revenue for 2011 was put at about Dh4.8 billion while expenses were projected at Dh1.11 billion, including interest on certificates of deposits.

A sharp fall in interest income depressed the central bank’s net profits by 14.4 per cent in 2009 but its investment income more than doubled through the year.

From Dh3.722 billion in 2008, the Central Bank’s net income dipped to Dh3.184 billion in 2009, the central bank said Bank said in its 2009 report.

The decline was caused mainly by a plunge in interest income from a record Dh5.688 billion in 2008 to only Dh461 million in 2009.

But this was partly cushioned by a surge in investment income from about Dh1.539 billion to Dh3.844 billion in the same period.

Interest expenses plunged from around Dh3.188 billion in 2008 to Dh701 million in 2009 while net interest and investment income shrank from nearly Dh4.039 billion to Dh3.614 billion, the report showed.