Continued growth in UAE banking assets takes a pause

Credit to private sector retrogresses to Sept 2018 level

ABU DHABI/December 19-2020: The continued growth in UAE banking assets has taken a pause in October, with the aggregate balance sheet of the banking system in the UAE settling for a contraction in October, albeit small – from AED3.25 trillion to AED3.24 trillion as of October end.

The October data for the UAE’s banking system can be viewed as a reversal as the aggregate asset base of the banking system with about 50 banks contracted by more than AED11 billion belying the trend hitherto when the assets have been growing sequentially during the past quite a number of quarters.

The aggregated assets of the banks registered a month-on-month decrease of 0.3 per cent at the end of October 2020, which was mainly due to the decrease in Cash and Deposits with Central Bank, ‘Due from Resident Banks’ and ‘Domestic Investments’ by 5.3 per cent, 27.2 per cent and 2.4 per cent
respectively.

“This has, in fact, overshadowed the increase in Domestic Credit, Other Assets and Foreign Assets by 0.1 per cent, 0.2 per cent and 2.8 per cent respectively,” the Central Bank said.

Businessbenchmark.news can’t vouch that the aggregate asset book has been on the climb on a monthly basis in the past two years, but the quarters have been. Going forward, in retrospect, the October could also prove to be an outlier month.

Credit to pvt sector

More noticeably, the credit to private sector in October 2020, at AED1.12 trillion, has in fact, retrogressed to the levels of September 2018.

The fall in aggregate assets in October makes news also for the fact that these are the times when repayment of a lot of private sector loans have sought deferment under the Targeted Economic Support Scheme (TESS) announced by the Central Bank earlier this year.

In a statement issued by the Central Bank recently, the governor of CBUAE, Abdulhamid M Saeed Alahmadi revealed that more than 310,000 retail customers, nearly 10,000 small and medium-sized enterprises and more than 1,500 corporates have availed the TESS loan deferral since March after the scheme was announced by the Central Bank.

Credit to Government & related sectors

Contrary to the trend observed in the private sector credit, exposure to ‘government and official entities’ during the past two-year period grew fairly well by 35 per cent, from AED354.32 billion to AED477.80 billion, as of October end, 2020.

During the same period, the total deposits of the banking system also registered a growth of 12.66 per cent – from AED1.53 trillion to AED1.72 trillion.

Foreign banks have been noticeably circumspect about lending in the domestic market and more so to the private sector.

Though the total assets held by foreign banks improved since September 2018 by 12 per cent, from AED364.44 billion to AED407.92 billion, the lending to private sector during this period contracted on absolute terms, from AED137.99 billion to AED126.39 billion.

 

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