Banks are vying to attract Emirati customers as better job security and bigger salaries make them less of a credit risk to lenders keen to shield themselves from more bad loans. Emirati consumers are likely to be increasingly targeted by lenders with offers such as preferential mortgage rates and attractive personal loans, say analysts.
"After the crisis there were worries about working environments," said Dalia Kenawy, a senior product manager at National Bank of Abu Dhabi (NBAD). "As UAE nationals' job security is much higher than others, this was one of the reasons why there has been more of an emphasis on lending to UAE nationals." Although Emiratis have historically chosen to bank with local lenders, both local and international banks are expected to increasingly compete for their services.
Some foreign banks are reducing mortgage rates and offering better car loans to attract clients, said Janany Vamadeva, a banking analyst at Al-Futtaim HC Securities in Dubai. With many banks still recovering from a build up of loan defaults and late payments after the global financial crisis, lenders remain wary about which customers they extend finance to. Some banks were forced to write down debts linked to the thousands of expatriates who left the country after a wave of job losses and a collapse in the country's property market.
In contrast, research suggests Emiratis pose less of a credit risk. A total of 22.1 per cent of expatriates were unable to meet loan or credit card payments at some point over the past year compared with 19.7 per cent of nationals, a survey conducted between June last year and last month by the research consultancy Datamonitor shows. "It's a safer segment as most Emiratis are employed by the government and have good job security and regular salary increases," said Jamal Alvi, the head of consumer risk management at Abu Dhabi Islamic Bank, which has a majority Emirati customer base.
"Other banks are trying to break into the UAE nationals segment and they may face a hurdle." Not only do Emiratis often expect higher loans based on their salary but they also ask to make repayments over longer periods, he said. Some banks have already made efforts to target nationals with certain products. Special personal loans and preferential rates for products such as mortgages are offered to Emiratis by NBAD, whose customers are also mainly nationals.
Dubai Bank in May last year launched a range of products available to Emiratis working in the government or semi-government sectors, offering property financing of up to 80 per cent or personal loans and credit cards at special rates. "Some banks offer different rates for different nationalities as it's based on the default rate of nationals from your country," said Ms Vamadeva. So-called profiling of customers based on their country of origin and also their credit history is expected to increase as banking checks become more sophisticated in the UAE.
"In this market there's opportunities for different rates based on the profiling of consumers and as banks look to better understand their client base there will be opportunities for increasing profitability going forward," said Richard Adams, a consulting analyst at Datamonitor in Dubai. @Email:email@example.com