Central Bank profits rise but assets tumble

The Central Bank of the UAE said yesterday its net profits edged up by around 1.4 per cent in 2008 but its assets plunged because of massive withdrawal of funds by the UAE banks to offset liquidity shortages.

From around Dh3.778 billion in 2007, the Central Bank's net earnings grew to nearly Dh3.832bn in 2008, the bank said in a statement.

The profit growth was sharply lower than that achieved in 2007, when net income shot up by a staggering 42 per cent from the 2006 net profits of around Dh2.654bn, according to the apex bank's balance sheet.

The surge in 2007 profit was a result of sharp rise in the Central Bank's assets mainly because of a massive increase in certificates of deposits issued by the Central Bank to the country's 24 national banks and 28 foreign units in 2007 and the first half of 2008 to mop up excess liquidity.

The situation was reversed in the second half of 2008, when the banks recovered the bulk of their CD investments with the Central Bank to offset a severe liquidity shortage caused by the global financial distress.

The withdrawal depressed the Central Bank's total assets to around Dh193.7bn at the end of 2008 from Dh285.9bn at the end of 2007.

According to the Central Bank's latest balance sheet issued in September, its overseas deposits were slashed by nearly Dh114bn in the first nine months of 2008 to meet growing needs by local banks hungering for funds.

The bulk of the cut was in CDs, which plunged from around Dh184bn at the end of 2007 to nearly Dh67.1bn at the end of September. The CD value continued to decline to reach lonely Dh32.7bn in January.

The balance sheet showed the Central Bank's held-to-maturity securities slipped from Dh98.8bn to Dh83.2bn in September while CDs under Repo leaped from zero to Dh17.7bn. The Central Bank's loans to local banks against CDs also soared from zero to Dh12.5bn in the same period.

The banks have also benefited from a Dh500bn emergency facility offered by the Central Bank in late 2008 to give them access to liquidity and allow them to meet their credit obligations.

Yesterday's statement said the Central Bank's Board of Directors approved the 2008 balance sheet and decided to distribute 50 per cent of the net profits to the Ministry of Finance.

It also agreed on the transfer of 20 per cent to Shaikh Zayed Housing Programme and 30 per cent as a permanent deposit of the Federal Government at the Central Bank.


Distribution

- 50 per cent of profit, or Dh1,916,142,792.13 to be transferred to the Ministry of Finance

- 20 per cent, or Dh766,457,116.85 to be transferred to Sheikh Zayed Housing Programme

- 30 per cent, or Dh1,149,685,675.28 to be transferred to the account of the Permanent Deposit of the Federal Government at the Central Bank

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