Dubai: Demand for business loans was marginally up in the fourth quarter of 2017 while the demand for personal loans remained flat, according to the December quarter Credit Sentiment Survey of the Central Bank of UAE.
The Credit Sentiment Survey is a quarterly publication of the Central Bank, which collects information from senior credit officers from all banks and financial institutions extending credit within the UAE.
For the December quarter, the survey’s results revealed a marginal increase in demand for business loans. By loan type, the modest increase in demand for loans was evident among conventional loans and large firms. Survey results also suggested that the most important factors in determining credit standards are economic outlook, industry or firm-specific conditions, and the quality of a bank’s asset portfolio.
According to survey respondents, 42.3 per cent reported no change, 36.6 per cent reported an increase in demand, while 21.4 per cent of respondents reported a decrease in demand.
By emirate, the survey respondents recorded an increase in demand for business loans across the board, mainly in Dubai.
With respect to specific terms and conditions, around 60 per cent of survey respondents reported no change, while more than 30 per cent respondents reported moderate tightening.
For the March quarter, survey respondents expected credit standards to moderately tighten, and the demand for business loans to increase further.
Demand for personal loans in aggregate was flat in the December quarter. However, survey respondents reported a moderate increase in demand for housing.
Moreover, when asked about which factors contributed to the change in demand for loans, the survey respondents cited that change in income, and financial markets outlook were the most important.
In terms of credit availability, more than 88 per cent of survey results cited that the credit standard to be unchanged across all the categories, consistent with previous quarters.
In terms of outlook, survey respondents expect terms and conditions pertaining to fees and charges to tighten marginally while maximum loan-to-income (LTI) and maximum loan-to-value (LTV) are expected to ease marginally.
By market segment, demand for loans increased modestly across all categories with the exception of non-resident borrowers. Overall, the increase in demand for loans was most noticeable among conventional loans, large firms and in the Islamic finance sector.
For the 2018 March quarter, survey respondents were expecting the demand for business loans to increase substantially, mainly among large local firms resorting to conventional borrowings.
In terms of outlook for the 2018 March quarter, the credit standards on aggregate were expected to tighten moderately. With respect to credit terms and conditions, in the December quarter, survey respondents reported a moderate tightening in fees and charges, and softening in maximum loan-to-income and maximum loan-to-value.
With respect to the outlook for the March 2018 quarter, survey respondents expect terms and conditions pertaining to fees & charges to tighten marginally while maximum loan-to-income and maximum loan-to-value are expected to ease marginally.
