The UAE’s consumer debt on the rise, fueling spending across the country
- Published on Wednesday, 24 July 2013 10:50
- 0 Comments
Consumer lending growth has doubled across the Emirates as a wave of credit-fuelled spending triggers warnings over excessive borrowing.
Credit cards and borrowing to buy cars drove up profits for UAE banks reporting earnings this week after consumers took out loans worth Dh9.8 billion more during the first five months of the year, already matching the increase for the whole of 2012. If present rates of growth continue, 2013 is on track to record twice as much new borrowing as last year.
Personal loans to residents have increased 3.8 per cent across the sector to Dh270.7bn ($73.8 million) between January and May, according to the latest data available from the Central Bank. Data for June is yet to be released, but the total already outstrips the Dh8.8bn ($$2.4 billion)rise in personal borrowing reported during all of 2012.
The increase comes as the Abu Dhabi Department of Economic Development warns of the dangers of rising indebtedness among Emirati borrowers.
“It’s important to bring awareness to the sensitive subject,” said Jalal Masaabi, a department spokesman at an event aimed at raising awareness about credit-fuelled spending in the capital this week. “In the end we want a national who is productive to the economy and not living pay cheque by pay cheque to pay off their debt,” he said.
Big banks are reporting rapid growth from their retail books while their corporate customers tread with caution. Sector-wide lending is up 2.9 per cent between January and May, the same data showed.
The banking sector’s recovery from the property crash has helped to tempt customers into car showrooms in greater numbers as credit becomes more freely available, according to analysts.
“We have more bank lending and that reverberates right through the economy,” said Richard Adams, director and senior consultant at Acuity Middle East, a consumer research company.
Emirates NBD’s credit card lending has grown by 14.3 per cent during the first half of the year to Dh3.65bn ($995 million). Emirates Islamic Bank, its Sharia-compliant subsidiary, boosted financing from credit cards by 20.9 per cent to Dh974m ($265.4 million) during the same period.
National Bank of Abu Dhabi reported personal loans of Dh27.2bn ($7.4 billion) so far this year, up 1.8 per cent.
The bank’s retail deposits, on the other hand, have surged 22.9 per cent to Dh49.5bn ($13.5 billion) in the same period.
Car loans also helped RAKBank to offset deleveraging among its retail banking customers. The bank’s car loans grew 23.2 per cent to Dh1.52bn ($414 million), the fastest growing segment of a retail lending portfolio which has held steady this year.
Dealers sold more than 245,000 cars in the UAE in 2012 and Frost & Sullivan projects the number could reach 370,000 vehicles this year.
Read the full story from The National.
Since the beginning of 2013, the UAE economy has been doing very well compared with the past 4 years. Not only is consumer spending rising rapidly, the stock market is rising in tandem. As of July 23, 2013, the Dubai Financial Market (DFM) us up 58% year-to-date.
What is clear from this is that the good times are back in the UAE, but for how long? This is anyone’s guess.