UAE banks to see significant credit growth from Q1 2022: Central Bank of UAE survey

Written by on January 30, 2022

Stock Bank loans consultant

Stock Bank loans consultant

Dubai: The UAE’s banks are expected to see a significant increase demand for both corporate and personal loans in 2022, according to the latest Credit Sentiment Survey of the Central Bank of UAE (CBUAE).

Credit Sentiment Survey is based on data collected from senior credit officers from all banks and financial institutions extending credit within the UAE.

The survey results for the December quarter highlighted an increase in credit appetite and demand for loans, both business and personal, in the UAE, coupled with an easing of credit standards for personal loans.

Growth in business loan demand was at its highest on record during the quarter, surpassing the record set in the previous quarter, and reflects ongoing optimism regarding the recovery from the pandemic.

Looking ahead, expectations for loan demand in both the business and household sectors, along with changes in credit standards, suggest favorable credit conditions in the first quarter 2022.

December data pointed to a substantial increase in business loan demand form corporates and small businesses, which continued to be supported by solid growth across all Emirates.

Business loans

The growth in demand for business loans was evident across all loan categories, and was most pronounced among large firms, locals and conventional loans, predominantly driven by customers’ sales, customers’ fixed asset investments and the property market outlook.

In terms of credit availability, survey results suggest that credit standards for business loans were broadly unchanged. The outlook for the March quarter remains positive with survey respondents expecting a strong increase in credit demand, though with a moderate net tightening of credit standards.

Personal loans

The fourth quarter survey results indicated strong consumer appetite for credit in the December quarter, with growth in demand for personal loans at its highest in seven years. Increased demand was widespread across all categories of loans, most significantly in the demand for personal, credit card and housing loans.

Survey respondents suggest that the determinants of change in demand for personal loans were related to the financial market outlook, change in income, interest rates and the housing market outlook. With respect to credit availability, a moderate easing of credit standards for personal loans, in aggregate, was observed.

Looking ahead to the March quarter, personal loan demand is anticipated to remain solid across all Emirates, while credit standards, in aggregate, are expected to remain broadly unchanged over the next three months.

Credit standards

With respect to specific terms and conditions on loans to firms, a moderate tightening of credit standards was observed across all categories of business loans in the December quarter. Terms and conditions pertaining to premiums charged on riskier loans and collateralization requirements received a higher degree of tightening. Looking forward, survey respondents expect a further tightening across all credit terms and conditions, particularly with respect to premiums charged on riskier loans and collateralisation requirements.

In the personal loans segment, the survey results showed a slight net easing of the maximum LTV [loan to value] ratio and maximum LTI [loan to income] ratio, while fees & charges remained unchanged. For the March quarter, 96.4 per cent of survey respondents anticipate no change in terms and conditions.

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