Corporate lending in the UAE is expected to increase this year as business confidence improves, according to a senior Mashreq investment banker.
Corporate lending in the country may rise 7 per cent this year from about 5 per cent last year, said John Iossifidis, head of corporate and investment banking at Mashreq.
“Certain activity has started to change,” he said. “For example one of our clients is a large dealer in lorries required for the projects going up. They had very few sales between January to October last year, single-digit sales. Since October, they have been running at 40 to 50 lorries a month. That means people are gearing up for projects.”
The Australian banker said that Mashreq had protected itself from some of the bigger losses suffered by other banks over the past couple of years by focusing on industries such as a real estate and non-bank financial services which it had a previously low exposure to, and by increasing conditions on lending to small and medium-sized enterprises.
That strategy, which is also focusing on lending to retail, automotive, health care and education businesses as well as real estate and non-bank financial services, has paid off for the bank, Mr Iossifidis said.
As a result corporate lending at Mashreq grew at a rate of 7 per cent last year – outpacing the wider market.
He said it is also expected to beat the industry average this year.
Mr Iossifidis outlook comes amid a challenging stretch for UAE banks, which have not been having the best of times since the price of oil began its long descent during the summer of 2014. Deposits have dwindled as government-related entities withdrew funds to help fill a growing budget deficit.
While that drop, which has been reversing since November, led to an increase in borrowing by governments to reduce those deficits, it has softened demand for loans among local corporations and increased the level of debt defaults. Among the hardest hit have been small and medium-sized businesses.
The banker said that Mashreq would continue lending to smaller businesses, although in a more cautious manner.
mkassem@thenational.ae
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