UAE’s credit demand hit in second quarter
UAE CREDIT DEMAND TOOK A HIT IN SECOND QUARTER, KEY SURVEY FINDS
Bankers expect corporate loan growth to pick up pace in Q3
The UAE witnessed a decline in credit appetite both for business and personal loans during the second quarter of 2020, according to the Credit Sentiment Survey of the Central Bank of UAE.
The survey, a quarterly publication of the CBUAE, collects information from senior credit officers of all banks and financial institutions extending credit within the UAE.
While heightened uncertainty about economic activity due to the Covid -19 pandemic, reduced global growth, and a low oil price environment contributed to decline in loan demand, bankers expect corporate credit demand to rebound in the third quarter.
The survey results showed credit demand from corporates and small businesses declined, with over half of respondents, (53 per cent), assessing that demand has decreased either substantially or moderately. Almost a quarter of respondents saw no change in demand, while 22 per cent saw a moderate or substantial increase in demand.
Tightening standards
In terms of credit standards, 38.5 per cent of polled respondents registered no change while 37.6 per cent said that their bank has tightened credit standards moderately, and 14.5 per cent answered that the tightening was significant. 9.5 per cent of respondents have seen moderate relaxation of credit standards.
Covid-19 was seen as the key reason for decline in demand for personal loans and tightening of credit standards. The trend is broadly similar for all product categories of personal lending. The main explanation for the reduced demand in the second quarter was the adverse change of income, but the housing market and financial market outlook also contributed.
A moderate tightening of credit standards was reported by 47.4 per cent of respondents, while only 9.5 per cent reported significant tightening. 40 per cent have observed no change in credit standards, and 3.2 per cent of respondents have observed moderate relaxation. .
With respect to expectations for the third quarter of 2020, demand for business loans is anticipated to rebound, with 32 per cent of respondents expecting moderate increase in demand for loans, while 4.2 per cent expect significant increase.