UAE bank provisions up 33%
Provisions made by UAE banks rose 33.17 per cent year-on-year in November even as bank loans edged up by 2.3 per cent during the period, data released by UAE Central Bank today showed.
Total provisions in the region’s second largest economy increased to Dh55bn at the end of November, up from Dh41.3bn a year ago and from Dh54.1bn in September.
Specific provisions for bad loans were up 28.75 per cent, from Dh32b in November 2009 to Dh41.2bn in November 2010, while general provisions were up 48.39 per cent, from Dh9.3b to Dh13.8b during the same period. However, general provisions saw a monthly decline of Dh700m, or almost 5 per cent, from Dh14.5b in October 2010, data showed.
Loans and advances (net of provisions) by UAE banks, on the other hand, rose moderately from Dh1.027 trillion in November 2009 to Dh1.04tn in November 2010. The central bank attributed this decline to, “cautiousness and low demand from the private sector.”
Analysts believe lending outlook for the country’s banks is set to improve this year with banks having taken reasonable provisioning for the non-performing loans, in line with Central Bank requirements.
The increased level of year-on-year and month-on-month provisioning further shows that the country’s banks continue to take balance-sheet measures against bad loans.
In a bid to improve transparency in the banking sector, the country’s Central Bank recently revised the basis of classification of loans and their provisioning requirements, mandating lenders to book bad loan provisions on a quarterly basis instead of waiting until the end of the year to cover bad loans.
The central bank data showed the banks’ combined assets gained around Dh9 billion to peak at Dh1.632 billion at the end of November and maintain their position as having the largest assets in the Arab world.
Deposits slipped by Dh4 billion to Dh1,049.8 billion after leaping by nearly Dh40 billion in October while loans maintained their slow growth and rose by nearly Dh3 billion to Dh1,040.7 billion in the same period.
The figures showed certificates of deposits issued by the central bank leaped to one of their highest levels of Dh92.8 billion at the end of November, indicating swelling liquidity in banks and their reluctance to lend to the private sector. The increase followed a central bank decision two months ago to issue Shariah-compliant Islamic CDs worth around Dh3.5 billion.
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