The UAE banking sector has begun experiencing notable progress, following a few challenging years, with a revitalized infrastructure to underline this evolution. Banks are now emphasizing the expansion of their retail portfolios while making provisions for bad loans, which has led to a significant decrease in bad debt in the region, and a consequary increase in lending.
This splendid turn of events exemplifies the immense effort undertaken to streamline their balance sheets, representing a big leap for the UAE banking industry. On a positive note, there has been a consistent reduction in non-performing loans and strong loan growth, signaling a healthy boost in the region’s finances.
There was an impressive upturn in bank loans towards the end of the previous year, due largely to enhanced lending operations, paving the way for an expected further growth of at least 6 percent in the current year. This drastic improvement in the UAE banking system is a stark contrast to the situation in 2012 when bank lending dramatically decreased to only three percent.
Despite more stringent lending regulations from the Central Bank, banks are focusing on increasing their retail bank loans portfolio, unaffected by possible impediments to growth, buoyed by increasing consumer confidence.
Forecasts for UAE banking trends in 2014 include strong domestic growth, persistently low interest rates, and a marked surge led by major UAE banks. The rising numbers of expats and employment opportunities, bolstered by tourism and property development, have positively influenced the evolution of the UAE’s economic landscape.
The banking sector of the UAE demonstrated impressive results over the last year, with the private sector enjoying expansion and growth. A key aspect of the UAE’s favorable outlook for the upcoming year is that banks are grounding their focus on sustainable growth and measures to maintain and preserve it.
The Central Bank has been proactive in introducing regulations to prevent a repeat of the global economic crisis experienced four years prior, including defensive measures against non-performing loans and mortgage cap rules.
These legislations restrict first-time mortgage loans for expats to 75% of a property’s value, while for Emiratis it’s set at 80%. They also stipulate that the maximum duration for a mortgage loan should not exceed 25 years and the borrower’s age at the time of the final repayment should not be more than 65 for expats and 70 for Emiratis.
The banking system, designed to safeguard the interests of both UAE nationals and expats, has been meticulously scrutinized and managed, yielding promising outcomes that are estimated to continue positively impacting the UAE.
The future of the banking sector in 2014 looks promising. If individuals manage their finances judiciously – borrowing only what they can afford using bank loan calculators and ensuring timely repayments – this can, in turn, ensure a prosperous future for all.
