UAE bank lending to individuals boosted total loans and advances in July but overall growth in the past seven months suggests that credit growth this year is still growing at a slower pace than last year despite some encouraging signs of improvement in consumer confidence.
Loans and advances to individuals rose 2.9 per cent to Dh353.4 million in July from Dh343.6m in the same period last year, according to the Central Bank.
"Overall, the data still point to weak credit demand, with gross monthly credit growth averaging 0.2 per cent month-on-month in the first seven months of 2017, down from 0.5 per cent over the same period in 2016, " said Monica Malik, the chief economist at Abu Dhabi Commercial Bank.
While there have been signs of improvement in consumer confidence of individuals in the UAE as suggested by anecdotal evidence from Purchasing Managers' Index readings in recent months, economists say it is still too early to say whether it will rebound from several dismal years as low oil prices dampened appetite for consumers to borrow.
Elsewhere loans to government, the public sector, business and industrial sectors also rose between 0.1 per cent and 1.1 per cent month-on-month. Total loans and advances grew 0.2 per cent month-on-month and 3.5 per cent year-on-year to Dh1.594bn versus Dh1.54bn in the same period last year.
The lacklustre growth in loans and advances is bothersome for banks who, despite efforts to diversify their sources of income in recent years, still rely overwhelmingly on income from loans. Still, despite the slowing growth, lenders are still profitable as they have managed over the past year to reduce levels of bad debt and make more money from loans amid rising net interest margins.
Meanwhile, in July bank deposits grew 0.2 per cent month-on-month and 7.1 per cent year-on-year to Dh1.592bn compared with Dh1.486bn in the same period last year. That gain was boosted by non-resident deposits which rose to Dh184.8m in July compared to Dh170.8m in the same month last year. Ms Malik said that it was too early to tell whether the gain is a one off or would develop into a trend in coming months.