UAE bank deposits dip by over Dh35bn in August

Deposits with UAE banks plunged by more than Dh35 billion in August in the biggest monthly decline in many years but lending and loan loss provision slightly picked up, according to the central bank.

The decline in deposits depressed the combined assets of the country’s 23 national banks and 28 foreign units by nearly Dh16bn although the sector maintained its position as the largest in the Arab region.

From around Dh1,113.6bn at the end of July, the consolidated deposits with the 51 banks dived to nearly Dh1,078.4 billion at the end of August, a decline of Dh35.2bn, the central bank said in its latest banking indicators report.

The decline followed several months of a rapid growth in deposits and was the largest monthly fall in several years.

The report gave no reason for the sharp drop but analysts believe it was caused by a slump in government deposits with banks as it has apparently withdrew part of its funds to meet immediate financial commitments.

While there are no available data for government deposits in August, central bank figures for previous months showed they swelled from around Dh1202bn at the end of March to Dh226bn at the end of April and Dh229bn at the end of May before tumbling to Dh191bn at the end of June.

The report showed the banks’ total assets shrank to around Dh1,670.4bn at the end of August from Dh1,686.2bn at the end of July after a rapid rise in the previous months. Loans edged up to around Dh1,056.8bn from Dh1,052bn while capital and reserves reversed months of a steady increase and receded to nearly Dh266bn from Dh269.4bn.

Certificates of deposits (CDs) held by banks also fell to Dh94.3bn from about Dh108.2bn while there was no data on Islamic CDs, which stood at Dh17.6bn at the end of June, more than triple their level at the end of 2010.

Provisions for non-performing loans increased to Dh49.2bn from Dh48.4bn, boosting the total provisions allocated in the first eight months to Dh4.9bn. This compares with nearly Dh11.7bn during 2010.

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