posted on 27/09/2012: 523 views
The UAE is enforcing the tightest banking regulations in Gulf hydrocarbon producers and this is hindering rapid growth in their asset and credit base, according to Saudi Arabia's largest bank
In general, bank credit in the six-nation Gulf Cooperation Council (GCC) has started to recover due to low interest rates and other factors, National Commercial Bank (NCB) said in a study.
It said that the basic monetary stance in the United States-- as well as the West more generally-- is, if anything, likely to be further loosened with no near-term prospect of interest rate increases.
"Bank credit growth in the region remains generally very healthy with the positive momentum of recent months showing little sign of slowing markedly. Among other things, the region continues to benefit from historically low interest rates, thanks to its US Dollar pegs,” NCB said.
"At the same time, the GCC banking sector remains in generally robust health and eager to expand its asset base, although the regulatory and liquidity constraints in the UAE appear somewhat tighter than in the rest of the region.”
The report, citing banking data, showed credit growth in Qatar remains markedly faster than in the rest of the GCC, adding that the annual pace of growth has been in excess of 30 per cent since February.
Oman and Saudi Arabia constitute an intermediate category, NCB said, noting that Omani bank lending has been growing at more than 20 per cent a year since April. Lending in Saudi Arabia has tended to be in the range of 10-15 per cent. "Saudi Arabia has seen a particularly pronounced increase in lending to the public sector in recent months, although also private sector credit growth remains solidly in the double digits,” the study said.
Bank credit growth in Bahrain in March dropped from the low double digits, where it had been since last September, back to 7.8 per cent, it added.
Kuwait, by contrast, has seen a clear acceleration from 1.2 per cent YoY at the beginning of the year to 4.3 per cent YoY in June.
The UAE, which has the largest banking sector in the Middle East, remains the "relative laggard” with growth of 2.5 per cent in March, NCB said.
"The main fly in the ointment for the GCC banks is a clear loss of momentum in bank deposit growth…although the liquidity environment remains generally benign, the growing discrepancy between the rates of credit and deposit growth will over time likely present itself as a challenge.”
The report showed the loan-to-deposit ratio in Saudi Arabia has grown steadily in recent months, from less than 70 per cent in the spring to 75 per cent in July.
"In general, regional banks are affected – at least for now – by the greater economic confidence which has reduced the importance of investor risk aversion as a driver of deposit growth,” it said.
"Many investors have moved their savings to more profitable asset classes. Nonetheless, the cost of deposits faced by regional banks remains historically low, close to 0 per cent.” – Emirates 24|7
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