Dubai: UAE credit demand on the rise, according to the Third Quarter Credit Sentiment Survey, a survey of key banking sector lenders by the Central Bank of the United Arab Emirates (CBUAE) .
The credit sentiment results for the September quarter indicate increased demand for credit, by businesses and households, in the United Arab Emirates, coupled with easing lending standards for the household sector.
Demand for business loans was particularly strong during the quarter, recording the strongest growth since 2014, and reflects the business sector’s continued confidence in the economic recovery.
For the September quarter, survey results suggest that demand for business loans increased again with the largest increase since 2014.
According to the survey results, 47.5 percent of respondents reported no change, 42.5 percent reported an increase in demand, while 10 percent of respondents reported a decrease in demand.
Good prospects for business loans
Looking ahead, expectations regarding demand for business and personal loans as well as changes in credit standards bode well for credit growth in the months to come.
The country’s economic recovery is fueling a positive outlook and higher expectations for demand for business loans in the coming months.
Data showed that the demand for credit from businesses and small businesses saw a solid increase in demand, which continued to strengthen across all emirates.
âThe increased demand was widespread among the different loan categories, including large corporations, domestic enterprises, government-related entities, and small and medium-sized enterprises, and was mainly due to customer sales, real estate market prospects, interest rate, fixed assets of customers. investments and seasonal influences, âthe report says.
Looking ahead to the December quarter, demand for business loans is expected to remain strong across all emirates, although survey respondents expect a slight net tightening in credit standards.
Moderate growth in consumer credit
The results of the central bank survey showed moderate growth in consumer appetite for credit during the September quarter, although at about half the rate for business loans, which stems from ‘increased demand for personal loans in all emirates. The strengthening in demand was evident in all categories except non-housing investment and auto loans, with strong demand for individuals – credit card, housing – owner-occupied and personal – other.
Respondents indicated that the main drivers of increased demand were the housing market outlook, income development, financial market outlook and interest rates. The outlook for the December quarter remains optimistic, with survey respondents expecting a sharp increase in demand for credit and a marked easing of lending criteria.
Turning to the December quarter, survey respondents indicated that they anticipate further growth in consumer demand for credit. By Emirate, respondents expect a marked increase in consumer appetite and demand for personal loans at all levels, mainly in the Northern Emirates and Dubai.
Contrasting trends in credit standards
The results of the third quarter credit sentiment survey revealed contrasting trends in the credit standards applied by banks to business and consumer loans.
Data showed tighter terms and conditions for business loans across all categories during the September quarter. Survey respondents reported the highest degree of tightening in collateral requirements, as opposed to a lower degree of tightening in the allocation of loan rates over the cost of funds. Over the next three months, survey respondents expect credit conditions to tighten further, mainly on premiums charged on riskier loans and collateral requirements.
Looking ahead, survey respondents expect the factors driving the change in credit standards to remain the same as reported in the September quarter.
In the consumer credit segment, survey respondents expect the net easing of credit criteria for personal loans to continue in the December quarter. Credit standards for personal loans are expected to ease in all categories.
The results of the survey indicated a slight net easing of the maximum LTV (loan to value) ratio, a marginal net tightening of the maximum LTI (loan to income) ratio and a slight net increase in fees and charges (tighter financing costs). ).
For the December quarter, 98.7% of banks and financial institutions surveyed expect credit conditions to remain unchanged, although a small net percentage of respondents anticipate an easing of LTV and LTI limits and an increase in credit conditions. financing costs.