Ample liquidity in UAE banking as deposits rise

dubai — Deposits with the UAE banks increased while credit growth remained flat in July, indicating ample liquidity in the local banking sector, according to the Central Bank’s monthly data.

The month-on-month rise in deposits was driven by both the non-resident segment (up Dh6 billion in July) and the resident (up Dh4.6 billion). Non-resident deposits were up 2.3 per cent year-to-date in July 2018 despite domestic liquidity improving across the system this year, supported in large part by higher government deposits (up 28.5 per cent year-on-year).

Non-resident deposits accounted for 11.6 per cent of the total in July, moderately lower than its 11.8 per cent share in December 2017; this was due to the stronger growth in domestic deposits, revealed an analysis conducted by Abu Dhabi Commercial Bank. It was third consecutive monthly increase in deposits, said Monica Malik, chief economist, Abu Dhabi Commercial Bank. The increase in domestic deposits was driven by the private sector after falling in the previous two months. Government deposits were flat month-onmonth in July whilst governmentrelated entities deposits contracted by 0.9 per cent month-on-month, Malik said. Gross loan-to-deposit ratio moderated to 95.8 per cent in July, pointing comfortable and improving liquidity conditions in the banking sector this year.

“The ample liquidity conditions are helping to limit the positive spread between the Eibor and Libor rates from historical levels, though they have widened from the narrow differential seen in early-2018 (sometimes negative), which was unsustainable,” Malik said in the note.