The number of commercial banks operating in the UAE has increased to 51 and the figure is set to rise as the country pushes ahead with plans to tear down barriers to foreign investment in banking and other sectors.
Central Bank figures issued yesterday showed 23 national and 28 foreign banks were operating in the UAE at the end of March while there were two investment banks, 16 finance companies, 80 representative offices, 16 investment companies and 13 banking consultant firms. The list, part of a Central Bank report on the history of the UAE’s banking sector, also included 16 monetary and financial brokers and 105 money changers. By the end of March, the Central Bank had granted licences to 299 banks and financial institutions, which have 1,143 branches, the report said.
“The Central Bank is concerned with organising the financial institutions, especially banks, and in upgrading their management, capability to use available resources and financial soundness,” the report noted.
Banks operating in the UAE have steadily increased over the past few years as the country is gradually relaxing laws on foreign investment and removing a ban on licences for new foreign banks enforced in late 1980s.
The policy is part of reforms carried out by the UAE to attract foreign capital and in line with World Trade Organisation rules that require all members to open up their economic, financial and monetary sectors.
In 2006, the UAE had 46 banks, including 21 national and 25 foreign units. At the end of 2007, they increased to 22 national and 27 foreign units before peaking at 23 local and 28 foreign banking institutions in March.
The UAE is classified as an overbanked country given the large number of operating banks and their branches compared to its relatively low population of an estimated 4.5 million at the end of March.
With the total banking branches standing at 768 at the end of March, the UAE had a ratio of one bank for every 5,800 people, one of the highest in the world.
“Practically, I don’t think the UAE is overbanked given its massive economy and business opportunities,” an Abu Dhabi-based banker said. “You can see this from the rapid increase in deposits and credits as well as the high profits achieved by most banks every year.
“As the economy continues to expand and huge projects are in the pipeline, I believe there is room for more banks and other financial institutions in this country… I know this poses a challenge to national banks but they have become mature enough and competition always motivates us to improve and develop,” he said.
A breakdown showed the National Bank of Abu Dhabi had the largest number of branches in the UAE, standing at 73 at the end of March. It was followed by Emirates Bank International (60), Mashreq (54), National Bank of Dubai (50), Union National Bank (47), and Abu Dhabi Islamic Bank and Dubai Islamic Bank (44 each).
As for foreign banks, HSBC Bank Middle East topped the list with 20 branches. Standard Chartered had 13 while United Bank Limited and Citibank had 10 each.
The Central Bank report gave no figures on the banks’ balance sheet for March but at the end of 2007, the UAE had one of the Middle East’s largest banking sectors in terms of assets, which totalled about Dh1.23 trillion.
Deposits stood at Dh720 billion while loans and advances peaked at Dh722bn. Despite a sharp rise in their assets over the past three years, the UAE banks maintained a relatively high capital adequacy ratio, which stood at 14.43 per cent at the end of 2007. Their net profits hit a record Dh24.44bn last year and are expected to swell further this year.