This breaks the trend of slowing growth over the past year as banks struggled to raise deposits to cover lending.
Banks ease up on lending
Personal loans in the UAE grew for the first time since December, rising 2.9 per cent to Dh207.6bn (US$56bn) in May, according to the latest Central Bank monthly figures. Loan growth slowed over the past year, to a low of -0.3 per cent in February, as a result of a global credit shortage which forced local banks to reign in lending. When international investors withdrew large amounts of speculative cash from the UAE late last summer, many local banks found their loan books far exceeded cash deposits.
But analysts said they have begun to see the first results from Government measures to shore up the local banking sector, and an increased willingness to lend. Total bank assets continued to climb in May, rising 1.2 per cent to Dh1.49 trillion. Total deposits also rose, increasing by 1.1 per cent, Central Bank figures showed. Last week, the Central Bank governor, Sultan Al Suwaidi, said all local institutions would have to meet new capital adequacy requirements, to ensure that the local system will be better able to weather future international financial shocks.
By the end of this month, all local banks will be required to have at least 11 per cent capital adequacy ratio, which will then have to increase to 12 per cent by June of next year. As of March, the Central Bank said that the banking system's ratio as a whole stood at 16.2 per cent. Provisions for non-performing loans also rose to Dh22.9bn in May, up 2.6 per cent from April, the Central Bank said.