UAE banks to experience significant credit growth from Q1 2022: UAE Central Bank survey

Dubai: Banks in the United Arab Emirates are expected to see a significant increase in demand for corporate and personal loans in 2022, according to the latest credit sentiment survey from the Central Bank of the United Arab Emirates (CBUAE).

The Credit Sentiment Survey is based on data collected from credit officers of all banks and financial institutions extending credit in the UAE.

Survey results for the December quarter highlighted an increase in credit appetite and demand for both business and personal loans in the UAE, coupled with an easing of credit standards for personal loans.

Growth in business loan demand was the highest on record in the quarter, surpassing the record set in the previous quarter, and reflects continued optimism about the recovery from the pandemic.

Looking ahead, expectations for loan demand in the corporate and household sectors, as well as changes in lending standards, suggest favorable credit conditions in the first quarter of 2022.

December data indicated a substantial increase in demand for business loans from corporations and small businesses, which continued to be supported by solid growth across the Emirates.

Business loans

Growth in business loan demand was evident across all loan categories and was most pronounced among large corporate, premises and conventional loans, driven primarily by customer sales, customer capital investments and the outlook for the real estate market.

In terms of credit availability, the survey results suggest that business lending standards have remained broadly unchanged. The outlook for the March quarter remains positive, with respondents expecting a strong increase in credit demand, but with a moderate net tightening in credit standards.

Personal loans

Fourth quarter survey results indicated strong consumer appetite for credit in the December quarter, with demand for personal loans growing to its highest level in seven years. The increase in demand was generalized to all categories of loans, and more particularly to the demand for personal, credit card and housing loans.

Survey respondents suggest that the determinants of changes in demand for personal loans were related to financial market prospects, income developments, interest rates and housing market prospects. With regard to the availability of credit, a moderate easing of the criteria for the granting of personal loans, on the whole, has been observed.

Looking ahead to the March quarter, demand for personal loans is expected to remain strong across the UAE, while credit standards, overall, are expected to remain broadly unchanged over the next three months.

Credit standards

As regards the specific terms of corporate loans, a moderate tightening of credit standards was observed in all categories of corporate loans during the December quarter. Terms and conditions relating to premiums charged on riskier loans and collateral requirements have been tightened further. Looking ahead, respondents expect a further tightening of all credit conditions, particularly with regard to premiums charged on riskier loans and collateral requirements.

In the personal loans segment, survey results showed a slight net easing of the maximum LTV [loan to value] maximum ratio and LTI [loan to income] ratio, while fees and charges remained unchanged. For the March quarter, 96.4% of survey respondents do not anticipate any change in terms and conditions.