The loan scenario in the UAE's banking sector has undergone a drastic change since the recession descended on the country about three years ago with the private sector being overlooked by the lenders, the statistics for the last five years reveal.
Though more of the sour news has come from the government or government-related undertakings, the private sector was forced to bear the brunt of the crisis with the level of [net] loans dropping below the 2008 levels.
The net bank loans to private sector as of April end stands at Dh718.558 billion, which is less than that in 2008 when the claims on private sector was at Dh729.825 billion. In fact, 2008 was the year that witnessed the biggest growth in exposure to private sector in the last more than a decade.
The total claims on private sector surged from Dh491.528 billion to Dh729.825 billion during the year representing a growth of more than 48 per cent. The loans and advances to private sector are down by about Dh50 billion, at Dh532.575 billion, as of April end, 2011 compared with that in 2008.
Though the loans to the private sector were down in 2011, the banks in the UAE have been enthusiastic to park their surplus funds with banks abroad. This is evident from the movement of the figures under 'Due from other banks abroad'. This has grown from Dh61.140 billion as of 2009 end to Dh95.711 billion in a matte of 16 months, reflecting a growth of more than 56 per cent.
The most pronounced development was noticed in the credit extended to 'mining and quarrying' during the period under study. During the last four months, since the close of 2010, the credit to this economic sector almost tripled, from Dh6.717 billion as of December end, 2010 to Dh19.928 billion as of April end, 2011.
"Most of the other areas have been neglected by the banks during this period. However, there are signs that banks have started reaching out to the private sector even as the liquidity has improved substantially in the banking sector," said a banking analyst.
© Banking & Business Review 2011
