Today's Edition
ABU DHABI (WAM)
The United Arab Emirate's banking sector's growth momentum continued throughout 2023 and is expected to grow and recover further in 2024.
This is due to to the success of the Central Bank of the UAE's (CBUAE) strategies and policies in setting the necessary frameworks and regulations to deliver sustainable growth for the sector. In addition to its commitment to promoting economic and financial stability in the country.
Over the past year, CBUAE successfully in maintained a stable and efficient banking and financial system by providing efficient and effective central banking services.
Additionally, it also made record levels of growth in assets, credit, deposits, and investments, as well as maintained strong levels of capital efficiency, provisions, and reserves to ensure compliance with the highest standards of governance, transparency, and risk management.
This sector reaffirmed its strength and flexibility in dealing with all global geopolitical and economic challenges and changes.
The indicators of rising assets, financing and capital adequacy ratios reflect the sector's flexibility and resilience to adapt to the changes the world is witnessing. In addition to its ability to provide the suitable conditions to achieve economic and social development goals, while ensuring compliance with international standards in governance and risk management.
Bank Assets
At the end of Q4 of last year, the total assets of banks operating in the UAE increased by 3.1 percent (q-o-q), reaching Dh 4.075 trillion.
Between December 2022 and December 2023, the total assets of banks operating in the UAE increased by 11.1 percent (y-o-y).
According to the Q4 Report of 2023 issued by the CBUAE on the Monetary, Banking & Financial Markets Developments, gross credit increased by 0.5 percent (q-o-q), reaching 1.992 trillion at the end of December 2023.
On an annual basis, gross credit increased by six percent. At the end of December 2023, total deposits of resident and non-resident customers with banks operating in the UAE rose by 4.2 percent (q-o-q) and annually by 13.5 percent (y-o-y), reaching Dh 2.522 trillion.
Capital & Reserves
Aggregate Capital and Reserves of banks operating in the UAE increased by 5.2 percent (q-o-q), reaching Dh 488.7 billion at the end of Q4 of 2023.
At the end of December 2023, Total Capital Adequacy Ratio stood at 17.9 percent, remaining well above the 13 percent Capital Adequacy Ratio, including the 2.5 percent Capital Conservation Buffer requirement and the 8.5 percent Tier1 Ratio, prescribed by the Central Bank regulations in compliance with the Basel III guidelines.
Foreign Assets of the Central Bank
At the end of Q4 of 2023, the Central Bank’s foreign assets increased by 16.7 percent (q-o-q), reaching Dh 681.2 billion.
This rise was because of quarterly expansions in Current Account Balances and Deposits with banks abroad by 27 percent (a quarterly increase of Dh 94.4 billion) and in Foreign Securities by 10.6 percent (a quarterly rise of Dh 17.9 billion).
Monetary Developments
Money Supply M1, which comprises Currency in Circulation outside Banks(Currency Issued - Cash at banks) plus Monetary Deposits, increased by 4.2 percent (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was 12.4 percent (y-o-y) hike in the monetary aggregate M1, reaching Dh 829.3 billion at the end of December 2023.
Money Supply M2 (M1 plus Quasi Monetary Deposits (Resident Time and Savings Deposits in Dirham, plus Resident Deposits in Foreign Currencies)), grew by 6.0 percent (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was 18.8 percent (y-o-y) increase in Money Supply M2, reaching Dh 2,023.4 billion at the end of December 2023.
Money Supply M3 (M2 plus government deposits at banks and the Central Bank) also rose by 4.0 percent (q-o-q) during the fourth quarter of 2023.
On an annual basis, there was a 16.0 percent (y-o-y) rise in Money Supply M3, reaching Dh 2,445.2 billion at the end of December 2023.
Liquid Assets
Liquid assets in the UAE banking sector rose to Dh 742 billion at the end of the fourth quarter of last year, an increase of 29 percent y-o-y or Dh 165.7 billion, compared to Dh 576.3 billion at the end of the fourth quarter of 2022.
It also increased by 9.6 percent q-o-q, or AED 64.7 billion, compared to Dh 677.28 billion at the end of the third quarter of 2023.
The increase in liquid assets is a positive sign for the UAE banking sector, as it indicates that banks have sufficient assets to meet their short-term obligations.
Notably, this is important for maintaining financial stability and confidence in the banking system.
Tier1 Capital Adequacy Ratio reached 16.6 percent at the end of the fourth quarter of last year against 16.2 percent at the end of fourth quarter in 2022.
Common Equity Tier 1(CET 1 ) Capital Ratio rose by 14.9 percent at the end of the fourth quarter of 2023 as compared to 14.4 percent at the end of the fourth quarter in 2022.
