Surge in Bank Lending Observed in UAE During 2014
The UAE banking sector is showing significant progress after facing some tough times, thanks to a revitalized infrastructure. Banks are now focusing on growing their retail portfolios while setting aside funds for bad loans, which has led to a noticeable decrease in bad debt and a rise in lending.
This positive change reflects the hard work put into improving bank balance sheets, marking a major advancement for the UAE banking industry. The reduction in non-performing loans and strong loan growth are clear indicators of a healthier financial environment in the region.
Towards the end of last year, there was a notable increase in bank loans, primarily due to improved lending practices. This set the stage for an anticipated growth of at least 6 percent this year. This improvement is a stark contrast to 2012 when bank lending had dropped to just three percent.
Despite stricter lending regulations from the Central Bank, banks continue to focus on expanding their retail loan portfolios, supported by growing consumer confidence.
Banking trends forecast for the UAE in 2014 suggest strong domestic growth, low interest rates, and a significant boost led by major UAE banks. The increase in expats and job opportunities, driven by tourism and property development, has positively impacted the UAE’s economic landscape.
The UAE banking sector showed impressive results last year, with private sector growth and expansion. A critical aspect of the positive outlook for the coming year is that banks are concentrating on sustainable growth and its maintenance.
The Central Bank has been active in implementing regulations to prevent a repeat of the global financial crisis experienced four years ago. These measures include controls against non-performing loans and mortgage cap rules. Regulations limit first-time mortgage loans for expats to 75% of a property’s value and 80% for Emiratis, with a maximum mortgage duration of 25 years. The borrower’s age at final repayment should not exceed 65 for expats and 70 for Emiratis.
The banking system, carefully managed to protect both UAE nationals and expats, has yielded promising outcomes, with expectations of continuing positive impact on the UAE. Looking ahead to 2014, the banking sector seems promising. If people manage their finances wisely—borrowing only within their means and ensuring timely repayments—this could ensure a prosperous future for everyone.
