Business loan demand has surged in the United Arab Emirates during the third quarter, reflecting confidence of the corporate sector in the economic recovery, showed the data of Credit Sentiment Survey.
According to the survey of senior credit officers across the banking sector by the Central Bank of UAE (CBUAE), the demand is at its highest peak since 2014.
The survey shows that the UAE’s credit sentiment results for the September quarter points to increased demand for credit, from both businesses and households, coupled with a softening of credit standards for the household sector.
For the September quarter, survey results suggested that demand for business loans surged further with strongest increase since 2014.
According to survey results, 47.5 per cent of respondents reported no change, 42.5 per cent reported an increase in demand, while 10 per cent of respondents reported a decrease in demand.
Looking forward, expectations for business and personal loan demand along with changes in credit standards bode well for credit growth in the months ahead.
The UAE’s economic recovery is fuelling a positive outlook and higher expectations for business loan demand in the months ahead.
Data showed credit demand from corporates and small businesses reported solid increase in demand, which continued to strengthen across all emirates.
According to the report, increased demand was widespread among the different loan categories, comprising large firms, domestic firms, government-related entities, and small and medium enterprises, and was primarily driven by customers’ sales, the property market outlook, interest rates, customers’ fixed asset investments, and seasonal influences.
Looking ahead to the December quarter, business loan demand is expected to remain strong across all emirates, although survey respondents expect a minor net tightening of credit standards.
The survey found the main drivers of increased demand were the housing market outlook, change in income, financial market outlook, and interest rates. The outlook for the December quarter remains optimistic with survey respondents expecting a strong increase in credit demand and a net easing of credit standards.
The results of the third quarter credit sentiment survey revealed contrasting trends in credit standards applied by banks to business and consumer lending.
Data showed a tightening of terms and conditions for loans to businesses across all categories in the September quarter. Survey respondents reported the highest degree of tightening for collateralization requirements, as opposed to a lower degree of tightening for spread of loan rates over cost of funds. Over the next three months, survey respondents expect credit terms and conditions to tighten further, mainly with respect to premiums charged on riskier loans and collateralization requirements
Looking forward, survey respondents expect the factors driving the change in credit standards to remain the same as those reported in the September quarter.
In the consumer credit segment, survey respondents expect a continued net easing of credit standards for personal loans in the December quarter. Credit standards for personal loans are expected to ease across all categories, the survey found.
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