After the survey results for the 2021 December quarter showcased an increase in the credit demand for both, personal and business loans, the UAE banks are now expecting significant credit growth in the coming months of 2022, according to the latest Credit Sentiment Survey of CBUAE, Central Bank of UAE.
Credit Sentiment Survey is based on data collected from senior credit officers from all banks and financial institutions extending credit within the UAE. Growth in business loan demand was at its highest on record during the quarter, surpassing the record set in the previous quarter, and reflects ongoing optimism regarding the recovery from the pandemic.
Looking ahead, expectations for loan demand in both the business and household sectors, along with changes in credit standards, suggest favorable credit conditions in the first quarter of 2022. December data pointed to a substantial increase in business loan demand from corporates and small businesses, which continued to be supported by solid growth across all Emirates.
Business loans
The growth in demand for business loans was evident across all loan categories, and was most pronounced among large firms, locals, and conventional loans, predominantly driven by customers’ sales, customers’ fixed asset investments, and the property market outlook.
In terms of credit availability, survey results suggest that credit standards for business loans were broadly unchanged. The outlook for the March quarter remains positive with survey respondents expecting a strong increase in credit demand, though with a moderate net tightening of credit standards.
Personal loans
The fourth-quarter survey results indicated a strong consumer appetite for credit in the December quarter, with growth in demand for personal loans at its highest in seven years. Increased demand was widespread across all categories of loans, most significantly in the demand for personal, credit card, and housing loans.
Survey respondents suggest that the determinants of change in demand for personal loans were related to the financial market outlook, change in income, interest rates, and the housing market outlook. With respect to credit availability, a moderate easing of credit standards for personal loans, in aggregate, was observed.
Looking ahead to the March quarter, personal loan demand is anticipated to remain solid across all Emirates, while credit standards, in aggregate, are expected to remain broadly unchanged over the next three months.
Credit standards
With respect to specific terms and conditions on loans to firms, a moderate tightening of credit standards was observed across all categories of business loans in the December quarter. Terms and conditions pertaining to premiums charged on riskier loans and collateralization requirements received a higher degree of tightening. Looking forward, survey respondents expect a further tightening across all credit terms and conditions, particularly with respect to premiums charged on riskier loans and collateralization requirements.
The survey results in the personal loans category showed no changes in fees and charges along with the slight net easing of the maximum LTV ratio (loan to value) and maximum LTI (loan to income). Therefore, for the coming March quarter, almost all respondents are satisfied with the terms and conditions and demand no change.