Foreign banks boosted their deposits in the UAE by nearly Dh24 billion in the first nine months of 2011 as they are cautiously returning to the market because of a recovery in the domestic economy and global turmoil.
From around Dh51.5 billion at the end of 2010, their deposits with the UAE’s 51 banks swelled to nearly Dh75 billion at the end of September, the Central Bank said in its September bulletin, released this week.
Most of the increase was in August as they grew by around Dh12bn after a slight fall in July and fluctuations in the previous months.
The increase boosted the UAE banks’ total foreign liabilities to around Dh314.8bn at the end of June from Dh271.6bn at the end of 2010. The foreign liabilities at the end of September were at their highest level since the end of December 2007, when they peaked at Dh320.9bn.
Their combined foreign assets also rose to nearly Dh245.3bn from Dh233.5bn in the same period, the report showed.
Despite growth in foreign assets, banks maintained their debtor status as net foreign assets remained negative at Dh69.5bn at the end of September compared with Dh38.1bn at the end of 2010.
A breakdown showed foreign banks’ assets with the UAE’s 23 national banks and 28 foreign units included around Dh26.6bn in demand deposits at the end of September compared with Dh14.6bn at the end of 2010. Time deposits edged up slightly to nearly Dh48.4bn from Dh44.9bn.
The deposits by foreign banks had hit an all-time high of nearly Dh211bn at the end of April 2008 at the height of speculation that the UAE and other Gulf oil producers would appreciate their currencies against the US dollar.
Speculation began to recede after the UAE Central Bank repeatedly ruled out such plans and came almost to a standstill in 2009 after the country decided to withdraw from the monetary union launched by Saudi Arabia, Kuwait, Qatar and Bahrain. The other GCC member, Oman, also pulled out in late 2007.
The drive by speculators to take their funds out of the UAE and other Gulf nations gained pace just after the 2008 global fiscal crisis as foreign banks struggled to meet commitments and bridge a liquidity gap at home.
Despite the rise in June, foreign banks’ deposits with UAE banks remained at one of their lowest levels and were nearly Dh130bn below their level at the end of 2008, when they hit an all-time high of Dh205.6bn.
The report showed UAE banks’ deposits with banks abroad dipped to around Dh74 billion at the end of September from Dh76.3bn at the end of 2010.
Investment in foreign securities swelled to about Dh56.6 billion from Dh48.4 billion while loans soared to nearly Dh79.4bn from Dh62.8bn.