UAE banks are paying more for deposits as customers move money from current accounts into savings and fixed-term products, according to Nagham Hassan, a market analyst at eToro. The shift can put pressure on margins even as overall deposits continue to grow.
Hassan cited Central Bank of the UAE figures showing domestic credit up 15.3% in the year to August, compared with a 12.5% increase in resident deposits. Since June, domestic credit had risen 4.3%, against 1.5% for resident deposits, according to the commentary.
The gap matters because lending is growing faster than the deposits that help fund it. The mix matters too: savings and fixed-term deposits generally pay more interest than current accounts. Hassan said recent third-quarter results from large UAE banks showed a similar gap between loan and deposit growth.
Source: Nagham Hassan’s eToro commentary via mid-east.info. Illustrative photo by David Rodrigo on Unsplash.