UAE bank NPLs up 30% in a year

Specific provisions made by UAE banks for non-performing loans (NPLs) rose 29.8 per cent year-on-year in July even as bank loans edged up by just 2.6 per cent during the period, data released by UAE Central Bank today showed. UAE banks’ provisions for NPLs rose 2.3 per cent month-on-month to Dh48.4 billion in July 2011, and are up 9.3 per cent for the first seven months of the year, according to official data.

Total provisions in the region’s second largest economy increased to Dh63.5bn at the end of July, up 24 per cent from Dh51.3b a year ago and from Dh61.6bn in September, and are about 6 per cent of total lending, data showed.

Cautiousness and low demand from the private sector has resulted in UAE bank lending rising up by a mere 2.6 per cent in the 12-month period (until end of July) to Dh1.052 trillion, a decline of 0.4 per cent month-on-month and up 2 per cent in the first seven months of 2011.

Bank deposits, on the other hand, are up 11.5 per cent year-on-year to Dh1.114 trillion although the month of July saw a 1.1 per cent decline in total deposits, and the first seven months of 2011 witnessing a growth of 6 per cent in deposits.

Bank assets too have shown impressive growth in the past 12 months, up by 8.5 per cent to Dh1.686 trillion year-on-year in July 2011, and 5 per cent in the seven months of 2011 although there was a decline of Dh20.8b, or 1.2 per cent, in the month of July 2011.

Analysts believe lending outlook for the country’s banks is set to improve this year with banks having taken reasonable provisioning for the non-performing loans, in line with Central Bank requirements. The increased level of year-on-year and month-on-month provisioning further shows that the country’s banks continue to take balance-sheet measures against bad loans.

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