Lending activity in the UAE rebounded during the first quarter of the year as sentiment improved and banks ramped up credit disbursements to businesses and households, according to a new central bank report.

At the end of March 2022, gross credit amounted to AED1.832 trillion ($498 billion), up by 4.4 percent compared to the previous year and eclipsing the borrowings at the end of September and December last year.

Domestic loans extended by banks, which represent 89.5 percent of total credit, rose by 3.1 percent year-on-year, the UAE Central Bank said in its Quarterly Economic Review.

"The overall recovery in bank credit growth was driven by increments in lending to government related corporate, private corporate and retail sectors," the central bank said.

According to the central bank's credit sentiment survey for the quarter, credit appetite of banks has increased. 

Demand for personal loans recorded the highest quarterly increase since 2014 due to the improvement in economic conditions. Banks also saw significant demand for business loans among large companies.


While lending activity was on the rise, deposits also grew strongly in the first quarter, boosting liquidity and funding conditions in one of the Middle East's largest economies.

Total deposits at UAE banks stood at more than AED2 trillion at the end of March 2022, up by 6.6% compared to a year ago and 5% compared to the previous quarter.

Resident deposits, accounting for the bulk or 89.3 percent of total deposits, rose by 6.8 percent year-on-year to AED1.791 trillion. The strong growth was mainly due to private sector corporate and retail deposits.

The central bank also said that banks in the UAE remained well-capitalised in the first quarter, with the overall capital adequacy ratio standing at 17.1%, Tier 1 capital ratio at 16% and common equity tier 1 ratio at 14.2%.

The eligible liquid assets ratio, which reflects banks' liquidity, was pegged at 19%, well above the 10% minimum regulatory requirement.

(Reporting by Cleofe Maceda; editing by Seban Scaria)