UAE loans-to-deposits ratio falls in December

The UAE banking system’s gross and net loans/ deposits ratio declined sharply in December 2016 reaching 100.7% and 93.8% respectively, the lowest levels since June 2015.  The main driver was a rise in deposits at year-end, although loans declined slightly as well.  

Total bank deposits rose 2.7% m/m (6.2% y/y) in December, with residents’ deposits up 1.9% m/m and non-residents’ deposits up 8.6% m/m.  The rise in residents’ deposits was largely due to the private sector (+AED 24.2bn).  Higher government deposits in December were almost totally offset by a similar magnitude decline in GRE deposits.  There is no breakdown yet of non-residents’ deposits.  While non-residents’ deposit growth has been much faster than residents’ deposits in 2016, it accounts for only 12% of total bank deposits.  The share of non-residents’ deposits has increased from 10% of total bank deposits in 2014 however. 

Total bank loans declined -0.1% m/m in December although on an annual basis, loans were up 6.0% y/y.  The fastest growing component was public sector/ GRE borrowing, up 9.2% y/y at end-2016 from 3.1% at end-2015.  Government credit growth slowed to 3.6% y/y in December 2016 from 8.8% a year earlier, while private sector credit growth (including non-bank FIs) slowed to 4.9% y/y from 8.9% at end-2015.