By CL Jose
DUBAI: Are foreign banks becoming less interested in the UAE market?Though there have not been any specific indications to prove this point, the foreign banks with an equal footing with the domestic banks in the UAE, at least in terms of number, have been reducing their exposure to the UAE market almost all fronts at least during the past three years, the Central Bank data reveals.
Take for example the case of the combined asset base of foreign banks. While the assets of national banks grew from AED1.875 trillion to AED2.334 trillon between 2015 and 2018– which was a decent 24.5 per cent growth, the foreign banks trails behind their national counterparts during this three-year period as their assets shrank by 12.5 per cent during this period.
However, these figures do not take into account the deals that take place from Dubai International Financial Centre (DIFC), which runs under a different regulatory regime.
UAE has for long been witnessing the presence of large multinational banks such as HSBC, Standard Chartered, Citi etc, and several other banks from the GCC and other Middle East countries.
The fall was not only on absolute terms; the ratio of banking assets owned by foreign banks in the UAE during this period fell from 18.04 per cent to 13.39 per cent. Needless to say, the trend has reflected on all aspects of the balance sheet during this period.
While the total credit from national banks grew from AED1.145 trillion to AED1.392 trillion, that of foreign banks dwindled from AED215.8 billion to AED189.2 billion.
One area worth being highlighted will be the funding to the governments and government related enterprises (GREs), where the presence of foreign banks has fallen substantially albeit from a small base. While the national banks’ financing to this segment increased from AED277.4 billion to AED324.6 billion during this three-year period, foreign banks’ exposure to this segment witnessed a big drop – from AED41.9 billion to AED25 billion – a contraction of more than 40 per cent.
The less active role played by the foreign banks during this period has helped them boost their capital adequacy ratio (CAR). While national banks saw their CAR move up from 18.1 per cent to 18.7 per cent – a marginal rise, foreign banks witnessed a smart growth in their average CAR from 18 per cent to 21 per cent – leaving much to be desired on the asset base.