June 8 (Bloomberg) -- United Arab Emirates banks’ overall deposits advanced by 2.1 percent in April from the previous month, helping to further ease liquidity in the second-biggest Arab economy.
Bank deposits increased to 1.13 trillion dirhams ($307 billion) from 1.11 trillion dirhams in March, according to data posted on the central bank’s website today. Lending rose 0.6 percent to 1.05 trillion dirhams, which lowered the industry’s loans-to-deposits ratio to 93.4 percent in April from 98.3 percent at the end of December, the data showed.
The increase in deposits “reflects the high oil prices benefiting the economy,” Giyas Gokkent, group chief economist at the National Bank of Abu Dhabi PJSC, said in a telephone interview. “We will probably continue to see relatively robust deposit growth as long as oil prices remain firm.”
U.A.E. banks faced a shortage of deposits from the onset of the global financial crisis in September 2008 as foreign investors speculating on a revaluation of the currency pulled out and credit markets froze. The loan-to-deposits ratio was 108 percent at the end of 2008.
It’s the third consecutive month that U.A.E. bank deposits have recorded strong growth. The banking industry has already added 78.7 billion dirhams in deposits this year compared with 67 billion dirhams in all of 2010.
Gokkent said he expects bank lending to improve in the second half as “the system is very comfortable in terms of liquidity and that liquidity has to go somewhere.”
Bank lending in the U.A.E. increased by 2.2 percent in the four months through April after advancing by 1.3 percent in 2010. Bank credit rose at more than 30 percent annually between 2005 and 2008 as higher oil revenue spurred economic growth.
Non-performing loans as a percentage of gross lending increased to 4.2 percent at the end of April from 4.1 percent at the end of December, according to the central bank data.
The non-performing loans ratio of U.A.E. banks will continue to climb through 2011 and should peak by the end of year or by the first half of 2012, brokerage company Beltone Financial said in a report today.
To contact the reporters on this story: Arif Sharif in Dubai at email@example.com
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