Banking sector remains positive in Q3
The overall soundness of the banking sector remained positive during Q3 of 2019, according to the Q3 Economic Review issued by the Central Bank of the UAE.Banks operating in the UAE remain well capitalised, with the Capital Adequacy Ratio at 17.7 percent, Tier 1 Capital at 16.5percent, and Common Equity Tier 1 at 14.7percent, which are well above the regulatory requirements set by the CBUAE.
The Loans to Deposits ratio for the whole banking system increased only slightly from 95.4 percent in June 2019 to 95.5 percent at the end of September 2019, mainly due to the slower growth pace of deposits (Q-o-Q 1.6 percent) compared to the registered growth in gross credit (Q-o-Q 1.7 percent).
Looking at the breakdown between Conventional and Islamic banks, the L/D ratio stands at 96.2percent and 92.9percent, respectively, increasing by 0.2 percentage points from the previous quarter for the conventional banks, while declining by 0.3 percentage points for the Islamic banks.
The Loan to Deposit ratio for Conventional banks in September 2019 increased compared to a year ago when it was 95.5 percent. For Islamic banks, L/D also increased from 92.6 percent in September 2018 to 93.9percent at the end of the third quarter of 2019.
On the other hand, National banks have L/D ratio of 95.6 percent, relatively stable compared to June 2019, while the ratio for foreign banks increased in 2019 Q3 to 94.5 percent from 91.6percent in 2019 Q2.
Meanwhile, the eligible liquid assets,10 as a ratio of total liabilities, 11 remained at 17.6 percent at the end of 2019 Q3. This level of liquid assets constitutes an adequate buffer about the 10percent regulatory minimum required by the CBUAE.
The level of total liquid assets at banks, as of the end of 2019 Q3, stood at AED 430.6 billion, AED7.9 billion higher compared to the end of 2019 Q2.On a Y-o-Y basis, total liquid assets at banks rose by AED58.4 billion, registering an increase by 15.7 percent.
In addition, looking at the breakdown between the banks, data show that for Islamic and National banks the ELARs increased during 2019 Q3 compared to 2019 Q2 while for Conventional and Foreign banks it slightly declined.