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09 December 2023

UAE has largest Arab bank capital base

Private funds of UAE banking sector hit Dh151.2bn in 2008. (MAGDY ISKANDER)

By Nadim Kawach

The UAE controlled the largest banking sector in the Arab World in terms of capital at the end of 2007. It was expected to have maintained that status through 2008 because of a steady rise in its banks' financial base.

Official figures showed the combined capital and reserves of the UAE's 24 national banks and 28 foreign units stood at about $35.6 billion (Dh131bn) at the end of 2007, nearly a quarter of the total Arab bank capital of $147.2bn.

Saudi Arabia's banks had the second highest capital of around $28.2bn, while Kuwait came third with a collective bank capital of $16.1bn, showed the figures by the Abu Dhabi-based Arab Monetary Fund (AMF).

Egypt controlled the fourth largest capital and reserves of around $14.9bn, while Qatari banks came third with about $9.3bn at the end of 2007, according to AMF figures, which cited local government data.

Bankers expected the UAE to have maintained that status through 2008 as its banks are pushing ahead with a drive to expand their capital base to face growing domestic demand and adhere to instructions by the Central Bank to strengthen their financial position to deal with any crisis.

According to the UAE Central Bank, the banking sector's total private funds, covering capital and reserves, surged to a record Dh151.2bn at the end of June 2008 from Dh116.3bn at the end of 2007. Their capital in June is more than double their level of around Dh70.8bn at the end of 2005.

"I think the capital and reserves of the UAE banks have further swelled by the end of 2008 as most of them are pursuing a policy they have followed over the past years to boost their financial base," an Abu Dhabi-based bank manager said.

"I am sure such a trend gained momentum in the second half of 2008 because of the global financial crisis as this will provide them with a strong cushion against any bad debt problem or, say, a US-style sub-prime crisis."

Bankers said they expected the combined capital and reserves of Arab banks to have reached nearly $160bn at the end of June 2008. At around $41.1bn in that month, the UAE controlled more than 25 per cent of the total Arab capital.

It also had the largest bank assets in the region at the end of 2007 after overtaking Saudi Arabia, with an estimated $333bn compared with nearly $286bn for Saudi banks. At the end of June, the UAE remained the dominant Arab banking centre in terms of assets, with a record Dh1.42 trillion.

In terms of deposits, it was second only to Saudi Arabia, with around $178bn by the end of 2007, nearly 19 per cent of the total Arab deposits of $922bn. It maintained that position at the end of the first half of 2008, with deposits peaking at nearly $222bn. The figures also showed the UAE was second to Saudi in credits, which totalled around $176bn at the end of 2007 and continued their growth to peak at around $240bn at the end of June 2008.

According to the report, eight UAE banks were ranked within the largest 1,000 banks worldwide in 2006 and within the top 25 Arab banks. As for the six Gulf Co-operation Council countries as a group, the figures showed the combined assets of their banks totalled around $878bn at the end of 2007, more than half the collective Arab bank assets.

The rise in the GCC bank assets of around $195bn in 2007 accounted for nearly 46 per cent of the increase in the combined Arab assets.