“About 95 percent of the banks have already surrendered their TESS quotas…we have to move from the support phase and look forward,” said Abdul Aziz Al Ghurair, chairman of the UAE Banks Federation (UBF), at a press conference on Sunday.
While the banking sector has benefitted greatly from the central bank’s substantial support since the onset of the coronavirus pandemic, Al Ghurair believed that the sector no longer requires the re-enforcement and must begin easing out of the support under the Central Bank of the United Arab Emirates’ (CBUAE) Targeted Economic Support Scheme (TESS).
“Banks have taken adequate provisions from the early days of crisis. There is confidence that customers are able to meet their credit commitments…we expect to see steady a decline in loan impairments over the next few quarters,” he said.
The UAE government and CBUAE have taken proactive measures to protect and mitigate the impact of the pandemic on retail and corporate consumers, dedicating a AED250 billion ($68bn) stimulus package to providing liquidity for the UAE’s banking sector.
“The AED100bn ($27.2bn) zero cost facility (ZCF) benefited both individuals and businesses and facilitated liquidity management for banks through collateralised funding at zero cost,” said Al Ghurair.
“To date, the TESS loan deferral program by the CBUAE has benefited hundreds of thousands of retail customers, tens of thousands of SMEs, and thousands of private sector companies.”
Following a robust second quarter for UAE banks, Al Ghurair believed that the positive results are an indication of the sector’s strong recovery after a period of decline due to the pandemic.
The UBF chairman is anticipating an 8 to 10 percent increase in total assets of banks in the UAE by 2022, evidence that UAE banks have left the worst behind them and are entering a period of healthy growth in assets and profits.
He also expected UAE banks to maintain their growth momentum in the second half of the year, driven by improvements in operating conditions, cost efficiency, and credit demand.
Abdul Aziz Al Ghurair, chairman of the UAE Banks Federation (UBF).
Alongside the banking sector’s recovery and growth momentum, Al Ghurair believed that the strength of the operating environment will allow for the recovery of all the sectors that were hard hit by the pandemic.
“We expect to see a strong revival in tourism, hospitality and retail sectors. The real estate sector is already benefiting with gains in rents and sale prices,” he commented.
Digitisation
Al Ghurair, who is also chairman of Dubai’s Mashreq Bank, stressed the key role of the pandemic in accelerating the much-needed surge towards digitisation in the banking sector. He said: “There has been more digital transformation taking place across the economy and the biggest beneficiary from this is the banking sector.
“The business environment during the crisis has forced more banking customers to try digital solutions and now they want more of it. It is indeed a good development for banks, customers and all other stakeholders in the economy.”
Al Ghurair believed that the positive results are an indication of the sector’s strong recovery after a period of decline due to the Covid-19 pandemic.
The increasing appetite for digital-led services has allowed banks to reduce their number of branches and overall costs, while offering a better customer experience, according to Al Ghurair.
Attractive business environment
He believed that the UAE has the “right environment and legislations”, positioning it as increasingly favourable for businesses to move to. He added: “The UAE is always striving to create a positive environment for investors.”
Commenting on the impact of Expo 2020 Dubai as a key factor driving post-Covid recovery in the UAE, he said: “The UAE will benefit from Expo 2020 for about nine years as more international visitors and investors will be attracted to the country.”
Al Ghurair also observed that demand for loans had gone up in the lead-up to expo and is expected to pick up more pace over the coming months. He also expressed optimism that as more companies visit Expo, they may transfer part of their business activities to the UAE and start new investments here, resulting in new business for banks.
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