Government deposits drop 14% in February on weak oil price

Latest data available from the Central Bank of the UAE reveals government and public sector deposits declined to Dh343 billion in February, down five per cent year on year and a reduction from the peak of Dh403 billion in August 2014.

Abu Dhabi: Government deposits at banks plunged 14 per cent year on year in February to Dh158.3 billion. However, they grew 0.6 per cent compared to January levels.
Deposits of government-related enterprises grew 4.2 per cent year on year in February. But, they declined 5.8 per cent to Dh184.7 billion in a month-on-month comparison. The plunge in oil prices from their June 2014 peak of $114 a barrel to $40 a barrel today has eroded revenues.
Latest data available from the Central Bank of the UAE reveals government and public sector deposits declined to Dh343 billion in February, down five per cent year on year and a reduction from the peak of Dh403 billion in August 2014.
Other declines in deposits were noticed in non-banking financial institutions that reported a 21 per cent year-on-year plunge. The month-on-month drop was 1.1 per cent to Dh27.5 billion.
The only surge in deposits came from non-residents that showed double-digit growth of 16.9 per cent in a year-on-year comparison. Overall bank deposits grew 2.9 per cent year on year to Dh1.471 trillion.
During the period, banks continued to invest in certificates of deposits (CDs). The CDs grew 20.4 per cent year on year to Dh116.5 billion and by 12.9 per cent in comparison with January.
"Certificates issued by the Central Bank and sold only to banks to absorb excess liquidity are also used as an indicator to determine domestic interest rates," said Alp Eke, senior economist at National Bank of Abu Dhabi.
Certificates of deposits are the monetary policy instruments through which changes in interest rates are transmitted to the UAE banking system, he said.
Banking sector liquidity has deteriorated, Eke said. "It is reflected in the net loan-to-deposit [LTD] ratio increase since June 2014," the senior economist said.
Credit intake has risen to 7.9 per cent year on year to Dh1.503 trillion in February. In a month-on-month comparison, it rose 0.8 per cent.
Domestic and government credit demand surged 8.1 per cent each while government-related enterprises reported 5.5 per cent year-on-year growth. In February, it dropped 0.2 per cent to Dh176.9 billion.
The business and industrial sector's appetite for credit was strong by 7.7 per cent on year on year and 0.9 per cent month on month to Dh690.4 billion. Private sector credit demand was strong at 8.2 per cent growth year on year to Dh1.024 in February.
Banks and financial institutions made specific provisions for non-performing loans of Dh73.7 billion, showing an increase of 2.6 per cent year on year and 0.4 per cent month on month. However, general provisions rose 10.8 per cent to Dh26.7 billion.
- haseeb@khaleejtimes.com