Abu Dhabi, UAE–The Central Bank of the United Arab Emirates (CBUAE) has noted with satisfaction the persistent credit appetite of the private sector in the country, evident in the strong demand growth for loans that were coupled with financial institutions’ increased willingness to lend in the first quarter of this year.
The continued growth in credit demand was supported by a positive outlook on the domestic economy, which so far offsets the adverse impact of rising interest rates on loan demand during the quarter, according to the Q1-23 CBUAE Credit Sentiment Survey, which added that the overall UAE banking system remained well capitalized
“The capital adequacy ratios improved further in Q1 2023 compared to the same period last year, reaching 17.8%. The liquidity and funding positions of the UAE banking system remained robust in Q1 2023, supported by strong deposit growth,” the apex bank said.
“Consequently, the improved liquidity and funding ratios reflected ample bank credit capacity. The UAE banking system asset quality indicators improved in Q1 2023. The net NPL ratio moderated from the peak reached during the pandemic to 2.9% in Q1 2023, reflecting both an increase in credit growth and a reduction in the stock of non-performing loans.”
The Abu Dhabi Securities Exchange (ADX) average share price index increased by 4.0% Y-o-Y in Q1 2023 and the market capitalisation reached AED2.59 trillion in March 2023, according to CBUAE’s figures.
The Dubai Financial Market (DFM) average share price index rose by 0.6% Y-o-Y in the first quarter of 2023 and the market capitalisation reached AED589.0 billion in March 2023.
Yesterday, the apex bank said that the Money Supply aggregate M1 increased by 2.1 percent, from AED 759.3 billion ($206.47 billion) at the end of March 2023 to AED 775.2 billion ($210.68 billion) at the end of April 2023.
This was due to AED 3.3 billion ($895.42 million) and AED 12.6 billion ($3.42 billion) increases in Currency in Circulation Outside Banks and Monetary Deposits, respectively.
The Money Supply aggregate M2 climbed by 2.0 percent, from AED 1,788.4 billion ($485.57 billion) at the end of March 2023 to AED 1,823.7 billion ($495.47 billion) at the end of April 2023. M2 rose due to an elevated M1, and an AED 19.4 billion ($5.27 billion) rise in Quasi-Monetary Deposits.
The Money Supply aggregate M3 also soared by 2.2 percent, from AED 2,195.9 billion ($596.33 billion) at the end of March 2023 to AED 2,245.1 billion ($609.46 billion) at the end of April 2023. M3 increased because of a raised M2 and an AED 13.9 billion ($3.78 billion) rise in Government Deposits.
The Monetary Base grew by 5.6 percent, climbing from AED 568.9 billion ($154.56 billion) at the end of March 2023 to AED 600.7 billion ($163.17 billion) at the end of April 2023.
The main drivers of this expansion of the Monetary Base were increases in Currency Issued, Reserve Account and Monetary Bills & Islamic Certificates of Deposit by 3.0 percent, 98.6 percent, and 3.2 percent, respectively, overriding the 49.1 percent reduction in Banks & OFCs’ Current Accounts & Overnight Deposits of Banks at CBUAE.
Gross banks’ assets, including bankers’ acceptances, rose by 1.0 percent, from AED 3,764.7 billion ($1,021.17 billion) at the end of March 2023 to AED 3,802.7 billion ($1,031.38 billion) at the end of April 2023.