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UAE banks lose AED56b govt deposits

|By TAP Staff| The UAE banking sector has lost AED56 billion ($15.25 billion) in government deposits since September last year, NBAD Chief Executive Alex Thursby disclosed. Out of this, NBAD alone lost AED48 billion he said.

According to a bank statement, deposits fell to AED31.2 billion last month from 69.6 billion at the end of December.

The decline in oil prices is forcing countries from Saudi Arabia to the U.A.E. to draw down reserves to maintain spending. Economic growth in the U.A.E., the second-biggest Arab economy, may slow to 3.5 percent this year, from 4.6 percent in 2014, according to the median estimate of nine economists compiled by Bloomberg, while oil has fallen about 45 percent in the past year. Loan growth in the U.A.E. is also showing signs of slowing and there has been a rise in the number of small and medium-sized company owners leaving the country without paying their loans, Dubai-based Emirates NBD PJSC said Tuesday.

“We are living in a ‘new normal’ because the system is subject to an oil price that is considerably lower than it was before,” Thursby said on the call. “This is not a U.A.E. problem. This is a Gulf effect, so I do see liquidity being tighter for some longer period of time.”

Gulf banks, which had battled to extend loans while oil averaged more than $100 a barrel, are seeing surplus cash dry up because of the slump in crude. The three month Emirates Interbank Offered Rate, a benchmark used to price some loans, has climbed 17 basis points since January to 0.85 percent on Wednesday, the highest in two years, according to central bank data on Bloomberg. Tighter liquidity is dampening loan growth in the U.A.E. and the six countries of the Gulf Cooperation Council, Emirates NBD said.

Third quarter profit at NBAD was AED1.3 billion, a 3 percent decline compared to a year earlier. Net interest income rose to AED1.83 billion, while non-interest income fell to AED763 million, the bank said. It also bought AED3 billion of Royal Bank of Scotland’s India loan book, Thursby said.