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UAE Islamic finance growth continues in 2015 - Fitch

UAE Islamic finance growth continues in 2015 - Fitch
Photo Credit: Arabianeye-Reuters

Dubai-Mubasher: The Islamic finance sector in the UAE has continued to outpace the conventional banking sector's growth in 2015, said Fitch Ratings.

Fitch noted that the six largest Fitch-rated Islamic banks' share was around 21% of total bank gross loans, up 3% in the first half of 2015, while they had around 20% of total assets by the end of H1-15.

Impaired loans/gross loans ratio was 5.3% by the end of H1-15. Meanwhile, asset quality remains weaker than the conventional banks' average of 4%-6%.

“UAE Islamic banks will benefit from the central bank's decision this year to include sharia-compliant securities in the range of instruments it accepts as collateral for accessing liquidity,” Fitch said in its report.

“Islamic banks often hold these securities but in the past have had to hold liquidity either in cash or monthly offerings of central bank sukuk, with maturities of three to six months. This puts them at a disadvantage to conventional banks, which have a wide range of interest-earning liquidity management options,” added Fitch.

The key UAE sukuk issues in 2015 were Dubai Islamic Bank's $750 million and Noor Bank's $500 million.

Fitch projected a total UAE bank loan growth of 10% to 15% in 2015, closer to 10% as a sector average.

“We expect loan growth to moderate slightly further in 2016, but remain in high single digits,” said Fitch.