Demand growth for credit stabilises, says UAE Central Bank

Abu Dhabi - Demand for loans in Q4 to be strong from manufacturing.

A credit survey carried out in the third quarter ended September 30 2015, showed demand growth for credit appears to have stabilised following a slowdown from recent quarters.
"Overall, aggregate results are consistent with an ongoing healthy rate of demand growth within the UAE economy and with other partial indicators of economic activity, "says a credit survey carried out by the Central Bank of the UAE.
On lending to corporates and small businesses, survey respondents said "demand growth for business credit stabilised in the September quarter following consecutive quarters of decline."
Despite ongoing demand growth, survey results suggest a reduced willingness to extend business loans among financial institutions, with changes in credit standards suggesting a higher degree of risk aversion. This was evident in the reported tightening of credit standards pertaining to collateralisation requirements and premiums charged over riskier loans. Such results reflect ongoing uncertainty surrounding the global economy as borne out by the reasons given by survey respondents for the ongoing tightening in credit standard, said the credit survey for the third quarter.
For the December quarter, survey respondents expect further tightening in credit standards, while the demand growth is expected to remain at similar level as the September quarter.This was evident from the net balance measure, which increased from +5.9 in June to +9.9 in September.
By emirate, improved demand growth was evident across the board with the Northern Emirates reporting a notable improvement following a fall in demand in the June quarter.
For the December quarter, survey respondents expect the growth rate to remain unchanged. A net balance measure of 10.9 for December quarter expectations reflects only a marginal change from September quarter results. By emirate, survey respondents were most optimistic in Dubai, followed by the Northern Emirates and Abu Dhabi.
By market segment, improvement in demand growth was most notable among large firms and conventional loans.
An improvement for resident loans both expat and local was also evident.
In contrast, demand growth within the SME segment softened while demand for credit from non-resident and Government Related Entreprises categories fell.
Demand growth within the Islamic finance segment remained broadly unchanged and continued to show healthy growth.
For the December quarter, survey respondents were most optimistic about demand growth for large firms, across both conventional and Islamic products.
Survey respondents were also optimistic about demand growth from resident businesses, mainly expat, while non-resident demand is expected to continue to decline.
Consistent with trends over recent quarters, demand for credit within the manufacturing, transport, storage & communications, and financial institutions continued to outperform other sectors, while demand from property developers recovered from a soft June quarter. When asked about expectations for the December quarter, with the exception for financial institutions where demand growth will be lower, survey respondents expect recent trends to be maintained. Demand for loans from the manufacturing, retail & wholesale trade and transport, storage & communications sectors are expected to remain the strongest.
Demand for personal loans continued to grow during the September quarter, with the pace of demand growth stabilising at a more sustainable level.
However, by loan category, survey respondents observed decreasing loan demand for all housing categories including housing for Investment, refinancing and renovations.
Looking to the December quarter, survey respondents were optimistic on personal loan demand, with expectations of similar pace of demand growth on balance.
With respect to credit standards, results reported easing credit standards across all the categories in September quarter, though expectations for the December quarter suggested an overall tightening in credit standards which will be mainly driven by the tightening in the housing categories.
- haseeb@khaleejtimes.com