Commenting on the Retail loans expected to lift earnings for UAE banks, Clint Dempsey who is is a Principal Associate in the Banking and Finance team in the Eversheds Dubai office – said: “The retail lending climate in Dubai is currently very well placed for both banks and customers.
On one hand, you have liquid banks who are keen to lend money, partnered with an increasing population, with an appetite for spending, who are keen to take advantage of historically low interest rates.
The mortgage market does not yet seem to have fully recovered from the 2008 crisis; this, coupled with cash-rich buyers and recent mortgage regulations, has meant that the opportunity for banks to increase their mortgage book has not arisen as one would normally expect during a property boom, as we are seeing at the moment. The banking sector in the UAE, which has an overall capital adequacy ratio in excess of the central bank requirements, has therefore focused on retail loans to generate earnings and solid growth.
Banks will soon have the benefit and comfort of the The Al Etihad Credit Bureau, a federal government company which provides credit reports on individuals and companies in the UAE. It is anticipated that the number of retail loans may slightly decrease in the initial period once the Bureau starts but it in the long run will have a positive impact on the bank’s lending criteria and provisioning.”