Moody's Investors Services analysts expected the stability of the banking sector in the UAE during the current year, supported by economic growth, liquidity levels and capitalization.
This stability includes the macro level, the level of the business environment, the risks of assets, capital, profitability and efficiency, financing and liquidity, and government support. Agency analysts said during a press briefing in Dubai yesterday. Nieth Bujnagarwala, Vice President and Principal Credit Analyst at the agency, said that UAE banks benefited from large additional capital, and this is reflected in the increase in capital adequacy and increased profitability.He pointed out that the necessary reserves to cover bad loans are at good levels, as the bad loan reserves reached 104% of the total bad debts, according to Al Bayan newspaper.
He added that the growth of the non-oil sector in the country will also recover due to spending on infrastructure ahead of the Expo, and the announced stimulus packages, which serve economic diversification plans.
He expected the UAE to record growth in GDP, at 3.2% in 2019, suggesting that the country would record the lowest fiscal deficit in the Gulf region during the same year
He emphasized that in light of the expansionary financial situation from Abu Dhabi this year, real non-oil GDP is expected to grow by 3.3% in 2019, up from the estimates of 2.5% in 2018.
Moody's suggested that banks see an increase in loan losses over the next 12-18 months as cash flows shrink to borrowers due to lower property prices and higher interest rates.The agency attributed the increased lending to the real estate sector to the implementation of huge real estate and infrastructure projects before the Expo Dubai, where lending to the real estate sector increased to 20% of the total lending by the end of 2018, up from 16% in 2015.
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