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UAE, Saudi banks expect increase in loan demand in 2020

Dubai Expo 2020, banks’ regional expansion and slowdown in property market are contributing factors to rising credit

Banks in the UAE and the Kingdom of Saudi Arabia can expect an increase in loan demand in 2020, Bloomberg reported. However, lower interest rates might affect profit margins.

A significant improvement in credit volumes in the Kingdom, loan growth recovery in Turkey and strong volume in Egypt are contributing factors to UAE banks’ loan growth this year.

Loans might increase by 7 percent in the Kingdom compared to 6 percent last year. Its retail mortgages will continue to fuel credit on the back of 31 percent year-on-year expansion in the third quarter of 2019.

Dubai’s Expo 2020 comprising more than 190 countries will benefit lending in the UAE.  JPMorgan Chase analyst Naresh Bilandani, told Bloomberg in an email, “Expo 2020 is a key catalyst — which can offer a boost to both corporate and consumer spending — and provide impetus to tourism.”

Also, the UAE banks’ regional expansion will help to increase their revenue, especially with a government-led mortgages programme in the Kingdom driving home loans, the media report said.

According to Bloomberg compilation, the UAE’s economic growth forecast is expected to increase to 2.5 percent from 1.6 percent last year.

Last year non-performing loans in the UAE climbed to their highest level in more than five years, despite slowdown in property prices. The slowdown is mainly attributed to the oversupply in the UAE’s property market. Mortgage Finder noted that there has been a 59 percent increase in property enquiries between 2018 and 2019.

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