Mortgage lending picks up in 2010

Real estate mortgage loans by UAE banks picked up in the first 11 months of 2010 as the country is gradually pulling out of the clutches of the 2008 global fiscal distress, according to official data.

Mortgage credit grew by around 16.3 per cent in the first 11 months of last year compared with nearly 11.7 per cent through 2009, showed the figures published in the central bank’s monthly statistics bulletin.

From around Dh141.7 billion at the end of 2009, total mortgage lending extended by the UAE’s 23 national banks and 28 foreign units swelled to about Dh164.2 billion at the end of November 2010, the report showed.

It was an increase of nearly Dh22.5 billion during the first 11 months of last year compared with around Dh15.9 billion in 2009.

But growth remained far below the boom lending of the previous years, when real estate mortgage credit jumped by around 67.4 billion or nearly 123 per cent in 2008 and Dh28 billion in 2007, nearly double the previous year.

Despite the slowdown in 2009 and last year, the banking sector remains largely exposed to the real estate and construction sector, with such loans accounting for nearly 29 per cent of the total bank credit at the end of November.

The report showed construction loans totalled around Dh125.4 billion at the end of November while personal loans stood at nearly Dh246 billion. They included around Dh179.8 billion in personal loans for business purposes and the rest for personal loans for consumption purposes.

“In the UAE, the banking system is significantly exposed to the construction and highly speculative real estate sector,” the Washington-based Institute for International Finance said in a recent study.

Slow real estate credit is part of a general slackening in lending by UAE banks as total domestic credit fell to Dh782 billion at the end of November from nearly Dh788.8 billion at the end of 2009, according to the Central Bank.

The figures showed the private sector was the main victim of the slowdown as its loans slumped to about Dh585.9 billion from Dh607 billion in the same period.

Lending to the government grew to nearly Dh100.1 billion from Dh91.8 billion.

Credit remained slow despite a surge in deposits, which gained nearly Dh67 billion to reach Dh1,049 billion at the end of November.

Slow credit because of banks’ risk-aversion and poor loan appetite by the private sector allied with heavy bad debt provisioning to stifle their net profits after several years of high growth before the crisis erupted in September 2008.

In the first three months of 2010, the combined net income of 17 national banks slumped by about 9.6 per cent to Dh15 billion from around Dh15.5 billion in the first nine months of 2009, their balance sheets have shown.

In 2009, the net earnings of 16 listed national banks also dipped to nearly Dh14.87 billion from Dh18.71 billion in 2008, a decline of about 20.6 per cent.

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