UAE banks' loans-to-deposits ratio narrows in June

UAE banks’ loans-to-deposits ratio narrows in June

Bank lending remains slow as interest rates remain relatively high.

July 22, 2010 3:45 by Reuters

The gap between commercial-bank loans and deposits in the United Arab Emirates narrowed 20 percent in June over the previous month, latest Central Bank figures showed, indicating an improvement in the loans-deposit ratio.

The loans to deposits gap decreased to 40.2 billion dirhams ending June 2010 from 50.4 billion dirhams in May 2010, according to data from the Central Bank website on Thursday.

Total loans of UAE banks grew to 1025.6 billion dirhams in June from 1021.2 billion dirhams in May, while deposits increased to 985.4 billion dirhams from 970.8 billion dirhams.

Still, bank lending remains slow as interest rates remain relatively high.

“Deposits growth is positive but there’s still a gap and it delays credit growth and slower credit growth will take away from the economy growth dynamics,” said Marios Mariethafis, regional head of research at Standard Chartered bank.

“It is serious that there is still a gap. Ideally, deposits should be more than loans,” said an Abu Dhabi-based banking analyst.

Banks booked higher specific provisions for non-performing loans (NPLs) in June totalling 36.9 billion dirhams versus 35.2 billion dirhams in May, the data showed.

General provisions were slightly down to 13.0 billion dirhams in June from 13.6 billion dirhams in the previous month.

(Reporting by Stanley Carvalho, editing by Dinesh Nair)