In August, banks operating in the UAE provided the lowest monthly loans and loans to the various sectors in six years, while increasing the value of investments in bonds, stocks and securities held to maturity.
Moreover, two banking experts pointed out that with liquidity in banks, they are conservative in granting finance, looking for investment opportunities that generate returns, and looking for increasing the size of their assets and maintaining certain growth rates, especially in times of quiet demand for finance, in exchange for issuance activity. So banks seize the opportunity and invest in it, which happened last month.
Total credit
In detail, data issued by the Central Bank revealed yesterday that the total credit extended by banks to all economic sectors, individuals and institutions amounted to 2.6 billion dirhams last month, with the cumulative balance of this item to one trillion and 707.6 billion dirhams at the end of August 2019, compared with one trillion and 705 Billions by the end of July, a slight growth of 0.2%.
This is the lowest value of loans and loans provided by banks over a period of six months.
On the other hand, the data showed banks' tendency to invest in bonds, stocks and securities held to maturity.The total investments held by the end of last August amounted to 384.3 billion dirhams, compared with 379.9 billion dirhams at the end of July 2019, a monthly increase of 4.4 billion dirhams during the month Equivalent to 1.2% growth.
liquidity
The banking expert, Muhannad Aouni, said that «there is a reservation from banks in granting financing with the presence of liquidity, which drives them to look for investment opportunities to achieve returns that ultimately flow into their annual profits».
"The demand for financing from some sectors is calm, such as real estate, except for residential finance, in addition to the fact that individual financing is governed by their credit rating at Union Credit Information Company. No loan is granted until it has been well studied by the bank's risk departments," Awni said. "So lending naturally grows at a slower pace."
growth
For his part, said banking expert, Amjad Nasr, that «banks are looking to increase the size of their assets, and maintain certain growth rates to achieve quarterly and annual profits», pointing out that «investment in sukuk and bonds attracted the attention of banks during the last month, in conjunction with the issuance of Sukuk In response to offers from the Islamic Development Bank, banks in the region are willing to invest in sukuk. ”
Nasr pointed out that «banks do not prefer investments over its main activity of granting financing and loans, but there are times when the issuance of active, so banks seize the opportunity and invest, which happened last month».
He added that «the policy of banks is always dynamic and the search for alternatives in times of calm demand for funding, and to ensure the use of liquidity in the most efficient way».
384.3
Total investments held by banks at the end of August 2019