After a difficult few years, the UAE banking industry has started to see some significant improvements and is enjoying restoration to its infrastructure.
Banks have begun focusing on expanding their retail portfolios, continuing to build general and specific provisions for bad loans, and, in fact, bad debt was reported at the end of last year to have decreased in the region, while lending had increased.
This is all great news for the UAE banking sector, and shows the hard work that has been put into cleaning up their balance sheets.
Also a strong positive is the continued decline in non-performing loans as well as strong loan growth, which shows that the region’s finances are definitely on the up. Expansion in bank loans showed a spike at the end of last year, mainly thanks to improvements that were made to the operations of lending, and as a result, lending is expected to grow by at least a further 6 percent this year.
It highlights how far the banking system in the UAE has come compared to 2012, when bank lending was reduced to just three percent. Banks are now concentrating on actually growing their retail bank loans portfolio – and despite tougher lending criteria from the Central Bank, it doesn’t look like there’s any sign of this growth stopping anytime soon, as consumer confidence is also on the increase.
Predicted trends for 2014 banking in the UAE, include:
- Strong domestic growth
- Continuing record low interest rates
- Impetus by major UAE banks, demonstrating this push
Tourism, property and the rising number of expats and employment in the area has definitely had a positive role to play in the development of the UAE’s finances. UAE banks have shown a solid set of results over the course of the last year and the private sector has enjoyed growth and expansion in the region.
Also a factor in the UAE’s positive outlook for the year ahead is that the banks are not only concentrating on sustainable growth, but also on how this can be maintained and protected.
The Central Bank has been keen to implement regulations to avoid the situation caused by during the global economic crisis four years ago, and so have put plans in place to protect against non-performing loans as well as mortgage cap regulations.
These regulations limit expats to taking out a first time mortgage loan of 75% of a property’s value, and for Emiratis it’s 80% of a property’s value. It also says that the maximum length of a mortgage period should be 25 years and the maximum age at the time of the last repayment for expats should be 65 and for Emiratis it should be 70.
The bank loans system has been carefully overlooked and managed for a brighter future for UAE expats and nationals. So it is a good sign that the result of this is already visible and looks set to continue to improve matters in the UAE.
2014 looks set to be a good year for the banking system, and if everyone is equally sensible in managing their finances – only borrowing what they can afford with the help of a bank loan calculator, making repayments on time and so on – then the knock-on effect can only mean more good things for the future.