UAE- Credit appetite grows stronger

4/25/2016 4:07:57 PM

(MENAFN- Khaleej Times) Appetite for personal and business credit grew stronger in the quarter ended on March 31 2016 recovering from the softening loans demand in the quarter December 31 2015 said a credit survey issued by the UAE Central Bank.

However the ongoing tightening credit conditions for business loans suggested the reduced willingness to extend business loans among financial institutions partially reflecting the negative impact of lower oil prices the survey said.

The improvement in credit demand was evident across all market segments and industries. Despite the recovery in loans demand survey results suggested a reduced willingness to extend business loans among financial institutions with changes in credit standards suggesting a higher degree of risk aversion.

This was evident in the reported tightening of credit standards pertaining to all the terms and conditions said the survey. The UAE Central Bank survey respondents suggested that the lower oil prices had negative impacts on loan demands across different types of firms with lenders tightening the credit standards in response to low oil price as well.

For the June quarter survey respondents expected marginal tightening in credit standards while the appetite for business lending would improve further.

Echoing encouraging results for business lending demand for personal loans also strengthened and moved back into positive growth territory during the March quarter though at a relatively slower pace of growth compared with demand for business loans.

Outlook for the June quarter showed an optimistic stance and suggested modest demand growth. With respect to credit availability more than 85 per cent of survey respondents reported no change in credit standards and no one observed tightening in credit standards in any category.

In aggregate results reported marginal easing of credit standards in March quarter while expectations for the June quarter suggested an overall tightening.

For the rise in business loans 45 per cent of respondents reported an increase in demand 16 per cent reported a decrease in demand while 39 per cent reported no change.

The strengthening in demand was observed across the board and most evident in Abu Dhabi.

On the outlook for the second quarter the respondents were optimistic and expected the demand for business loans to increase further.

The strengthening in loan demand was attributable to all the emirates with growth in Abu Dhabi and Northern Emirates expected to be strongest.

Demand for retail and wholesale trade transport storage and communication and manufacturing recorded the most robust growth while mining and quarrying electricity gas and water and real estate development expanded at a relatively modest pace compared with other industries.

Regarding the expectations for the June quarter the pace of demand growth for business loans is expected to increase across all the other industries with the exception of mining and quarrying.

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