UAE – Mubasher: Moody's Investors Service has maintained a stable outlook on the UAE’s banking system owing to the banks’ resilient credit profiles that perform amid a stable but slow economy, according to a press release on Wednesday.

Moody's AVP-Analyst, Mik Kabeya, commented, “Banks' strong capital, stable funding and healthy liquidity balance weakening asset quality and softening profitability amid steady but subdued economic growth.”

As cuts on OPEC output will restrain hydrocarbon economic growth, the slowing global trade, in addition to moderate oil prices, a strong currency, as well as geopolitical tensions will weigh on the non-hydrocarbon economy, according to the press release.

Due to the increase of problem loans formation, lower business volumes and margin compression will be faced by corporates. Additionally, personal borrowers will see limited wage growth.

Continuous renegotiation and restructuring of large corporate debt will restrict reported problem loans formation while increasing the potential for future formation.

While a strong capital allows banks to absorb sizeable losses, moderate oil prices contribute to stable funding and liquidity conditions.

“UAE banks will remain primarily deposit-funded, with moderate recourse to confidence-sensitive capital markets,” the press release said.

Overall real GDP growth is projected to remain stable at 1.7% in 2019 and 1.4% in 2020, respectively, when compared to 1.7% in 2018, hence, stabilising below the 4.8% annual average of 2011-16, Moody’s said, forecasting a 4.0% credit growth in 2019 and 2020.