Liquidity to support growth

Highly liquid banks can play a big role in the UAE’s economic growth, according to the Institute of International Finance. Banks remain adequately capitalised with a 16.3 per cent Tier 1 ratio in June 2018, the eligible liquid asset ratio for national banks has increased, and the loan-to-deposit ratio edged down to 96 per cent in July 2018. However, NPLs as a share of total loans remain relatively high at 6.7 per cent. The net interest margin has improved, as loans reset at higher rates and funding costs improved as liquidity conditions eased. While a modest acceleration in growth in deposits and credit to 6.5 per cent and 4.2 per cent, respectively, funding costs too are expected to increase with the Fed rate hikes.