UAE: Retail lending shows signs of recovery in April

After declining m/m in February and March, gross bank loans increased 0.5% m/m in April.  On an annual basis however, lending contracted for the second month in a row at -0.7% y/y in April.  Lending to government has moderated, but is still up 9.1% y/y, while lending to GREs was steady at 0.2% y/y off the high 2020 base (lending to public sector entities surged in Q2 2020 as the country was locked down).

Bank loans to the private sector grew 0.5% m/m in April, the biggest monthly increase since March 2020, but were still down -2.6% y/y.  Lending to private sector businesses increased 0.2% m/m in April but was down -4.7% y/y.  Retail lending was the bright spot in the April data, jumping 1.0% m/m and 2.5% y/y, after contracting for most of the last two years. This points to strengthening consumer demand in the UAE, which is positive for the overall growth outlook.   

Private sector loans by borrower

Source: Haver Analytics, Emirates NBD Research

UAE bank deposits declined -0.2% m/m (0.3% y/y) in April, as residents’ deposits fell -0.7% m/m.  This was largely due to withdrawals by GREs and non-bank financial institutions.  However this was partly offset by growth in bank deposits by the government as well as corporates and individuals in April. On an annual basis, individuals’ deposits were up 9.1% y/y while government deposits were up 5.2% y/y.  Non-residents’ deposits, which account for around 11% of total bank deposits in the UAE, increased 3.8% m/m (and 0.4% y/y) in April.