Lenders in the UAE cut personal loans by more than 86% in 2009
UAE banks slashed personal lending by more than 86 per cent in the first nine months of 2009 as they pursued a credit-tightness policy and a drive to clean up their balance sheets, official figures showed yesterday.
From around Dh75.4 billion in the first nine months of 2008, personal loans provided by the country's 24 national banks and 28 foreign units plunged to only about Dh10.3bn in the first nine months of 2009.
The figures by the Central Bank showed personal loans for consumption purposes were cut to only around Dh400 million in the first nine months of 2009 from Dh22bn in the first nine months of 2008. Personal loans for business purposes dropped to around Dh10bn from nearly Dh53bn.
The report showed total personal loans grew from around Dh227.13bn at the end of 2008 to Dh237.45bn at the end of September 2009 and almost all the increase was in loans for business purposes.
Analysts said the decline was a result of the banks' policy to tighten their credit to risky sectors, including personal loans and real estate following the global fiscal distress and exposure by some UAE banks to a severe debt default problem involving the Saudi Saad and Algosaibi family businesses. Personal loans by UAE banks climbed to one of their highest levels in the first nine months of 2009 after inflation swelled to its highest rate and domestic demand was at one of its highest levels because of the oil boom.
At the end of September 2009, the ratio of personal loans to total credit of Dh963.7bn provided by the banks stood at around 24.6 per cent. The figures showed 2009 was a year of credit tightness and provision building as total credits increased by only around Dh39bn in the first nine months of that year compared with Dh300bn in the first nine months of 2008.
Provisions also climbed by a record Dh13bn in the first 11 months of 2009 compared with only about Dh3bn during 2008. Slackening lending activity allied with a surge in provisions depressed the net profits of national banks by around 13 per cent in the first nine months of last year but the income was expected to have rebounded in the fourth quarter.
The report showed the decline in personal loans was partly offset by a surge in credit to the government by nearly Dh16bn from around Dh72.2bn at the end of 2008 to Dh88.5bn at the end of September 2008.
Credit to public sector organisations also jumped by Dh22bn to nearly Dh92.1bn from Dh70.1bn.
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