More banks curb lending to low wage earners

CURBING LENDING: Lloyds has hiked its minimum monthly salary threshold to 25,000 dirhams. (Getty Images)

Banks across the UAE have hiked the minimum monthly salary needed to qualify for a personal loan, hurting low wage earners across the emirate.

Some banks have more than doubled the amount customers must earn in order to get a loan.

Lloyds TSB hiked its minimum monthly salary threshold on Oct. 1 to 25,000 dirhams ($6,806) from 12,000 dirhams, while Barclays raised its threshold to 8,000 dirhams from 4,000 dirhams in October, bank staff said.

Lloyds, which has also stopped providing home finance for apartments in the UAE and reduced its loan-to-value ratio on villas to 50 percent, denied the bank was reacting to the current financial turmoil.

"This move is reconfirmation of the bank's positioning as a premier service bank. This move ensures the bank's resources can be focused as appropriately servicing our customers who meet our minimum criteria,” a spokesperson for Lloyds said.

Arabian Business revealed last week HSBC raised its minimum monthly salary threshold to 20,000 dirhams from 10,000 dirhams on Nov. 1.

Locally, Dubai-based Emirates Bank on Nov. 15 increased the amount customers must earn in order to get a loan to 5,000 dirhams ($1,361) from 3,000 dirhams, while National Bank of Dubai (NBD) raised its threshold to 5,000 dirhams from 2,500 dirhams in mid-October, bank staff said.

Emirates Bank and NBD are part of Emirates NBD, the UAE's largest bank by assets.

National Bank of Abu Dhabi (NBAD), Abu Dhabi's largest lender by market value, has also increased its threshold, raising it at the beginning of November to 7,000 dirhams from 3,000 dirhams, staff said.

“It is highly likely we will see a pick-up [in non-performing loans] in fourth quarter results and given that is the case we would expect to see a big pick-up in provisioning," said Raj Madha, equity analyst at EFG-Hermes.

"In a bid to keep this provisioning need down, banks are clearly going to have to be more cautious going forward.”

Not all banks have tightened lending criteria in the wake of the liquidity squeeze.

Dubai-based Mashreqbank has kept its threshold at 3,000 dirhams, while Abu Dhabi Commercial Bank, the emirate's second largest lender by market value, has kept its threshold steady at 2,500 dirhams, staff said.

Dubai Islamic Bank's threshold is also unchanged at 2,000 dirhams, staff said.

Elsewhere in the region, banks have yet to tighten lending conditions, with banks in Qatar and Bahrain keeping their minimum monthly salary levels unchanged.

Staff at Qatar National Bank and Qatar Islamic Bank said their thresholds were unchanged at 2,000 riyals ($550) and 3,000 riyals respectively.

In Bahrain, Citigroup, the fourth largest bank in the United States, said it had not changed its lending threshold, currently at 300 dinars ($796).

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READERS' COMMENTS

Low Wage?
Posted by Josh Culling, Dubai, UAE on Sunday 23 November 2008 at 15:02 UAE time


What's so low wage about Dhs 25,000 per month?

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