Abu Dhabi financial sector performance index recorded its highest score since 2008 global financial crisis

Abu Dhabi (WAM): The Abu Dhabi financial sector performance general index rose remarkably in the first nine months of 2013, to register its highest level since the global financial crisis and its repercussions in 2008, scoring 111.1 points on average, compared to 100.7 points on average for the same period in 2012; and maintained its gradual improvement and stability, despite global economic turmoil and challenges. The index results released by the Studies Directorate of Abu Dhabi Department of Economic Development, indicated that the index reached 117.2 points in the third quarter of 2013 compared to100.4 points scored in the same period in 2012, increasing by 16.7%. The general index during the first quarter of 2013 registered 105.6 points, rising up by 2% compared to 103.6 points in the first quarter of 2012. The second quarter of 2013, witnessed a rising trend as the index registered 110.4 points, up by 4.6% compared to the first quarter. In the third quarter of 2013, this upward path culminated in recording 117.2 points, the highest score since the global financial crisis, higher by 6.2% compared to the second quarter of the same year. These results of the financial sector performance general index 2013 for the Emirate of Abu Dhabi, were attributed to the improvement in a number of sub-indices, coupled most importantly with the drop in inflation rates, loan to deposit ratio and the money supply to foreign reserves ratio; in addition to the improvement in the performance of a number of other sub-indices, which had a positive impact on the overall index, particularly the Abu Dhabi Securities market index. The analysis of the most important sub-indices of the general index revealed that the inflation rate increased during the first quarter of 2013 to 1.1% versus 0.8% in the fourth quarter of 2012, to revert back in the second quarter to 0.7%, before rising up to 1.4% in the third quarter of 2013. According to the index, oil prices dropped considerably in the first half of 2013, to reach in the second quarter of 2013 to US$104 a barrel on average, falling 7.5% compared to the first quarter, with prices rising to US$112.5 a barrel. In the second half of 2013, oil prices climbed back to around US$111 a barrel on average, in the third quarter, up by 6.8% compared to the second quarter. Abu Dhabi Securities Market General Index, improved significantly in the first nine months of 2013, to score 2905 points in the first quarter of 2013 compared to 2631 points at the end of the fourth quarter of 2012, increasing by 10.4%; as the stock exchange reflected the prevailing optimism about the future of the Emirate's economy, particularly in light of the stability enjoyed by the Emirate and the State, which turned Abu Dhabi into a safe haven for investment in general, and the Arab investments in particular. By the end of the second quarter of the year, Abu Dhabi Securities Market Index jumped 646 points to score 3551.2 points, rising by 22.2%. The index continued its upward wave to register 3843 points at the end of the third quarter of 2013. Regarding the debt-to-GDP ratio, the results of the index, revealed that it reached 282 % on average during the first nine months of 2013, and fell by 291.1% compared to the same period of 2012. This relative decline reflected the keenness of banks to monitor their credit policies, in order to reduce the size of the bad debts, and rebuild allocations required for addressing any challenges that they might confront in the future. According to the results, money supply N2-to-international reserves ratio, dropped substantially to 418% on average in the first nine months of 2013, with quarterly rates of international reserves growing at 7.1%, relatively larger than the 3.5% increase in the size of the money supply, especially with rise in oil foreign revenues, as a result of the increase in oil production. Loans-deposit ratio, according to the results, declined during the first nine months of 2013 to reach 91.7% versus 96.2% during the same period in 2012. Bank deposits, grew by 6.0% in the first quarter of 2013, compared to the last quarter of 2012 to Dh 1238 billion, up by 7.1% compared to the same period last year. By the end of the second quarter of 2013, deposits in banks operating in the country grew by 1.4% on a quarterly basis, reaching Dh 1255.6 billion, compared to an annual growth of 7.5%. In the third quarter of the same year, total deposits rose by 1.1 % on a quarterly basis to Dh 1270 billion, compared to an increase of 3.3% on an annual basis. Bank loans, advances and overdrafts increased by 2.4% in the first quarter of 2013, compared to the fourth quarter of 2012, reaching Dh 1126 billion, up by 4.8% compared to the first quarter of 2012, as bank loans, advances and overdrafts amounted to Dh 1074 billion. The second quarter of 2013, witnessed an increase in the volume of bank loans, advances and overdrafts by 1.9% compared to the first quarter of 2013, reaching Dh 1147.4 billion; increasing by 5.2% compared to the second quarter of 2012. In the third quarter of 2013 banks continued their lending activities which amounted to Dh 1178.3 billion, up by 2.7 % on a quarterly basis. In general, the results of the financial performance index confirmed that UAE banks continued their credit activities, supported by the increase in volume of deposits, and their strong financial positions, while following cautious policies in anticipation of any external shocks. The results of the capital and reserves sub-index, confirmed that banks in UAE enjoyed a high financial solvency rate of 20.2% in first quarter of 2013, higher than the requirements of the Central Bank of UAE (minimum of 12% and 8% for Tier 1). The results of the sub-index attributed this to the banks strong capital and reserves, which rose from Dh 276.4 billion at the end of the fourth quarter of 2012, to Dh 288.8 billion at the end of the first quarter of 2013. Capital and reserves dropped to Dh 267.9 billion at the end of the second quarter of 2013, as banks operating in the State repaid government deposits already inserted under Tier 2 capital. Liquidity and solvency continued to decline slightly to reach Dh 267.3 billion at the end of the third quarter of 2013. This affected the financial solvency of banks, which fell to 19% at the end of the second and third quarters of 2013. The results confirmed that the high financial solvency of banks compared to the ratios specified by the Central Bank, help banks to afford additional allocations against loans and advances portfolio, to cope with any shocks that it may be exposed to. The results of the capital adequacy ratio sub-index, indicated that the strong base of capital and reserves of banks operating in the country, have contributed to maintaining a high solvency ratio, especially that the Central Bank of UAE in September 2009 required a minimum capital adequacy ratio of not less than 11%, then raised that requirement to 12 % in June 2010. The results revealed that, despite the raising of the minimum requirement of capital adequacy ratio, banks succeeded in exceeding the ratio to register to 19.4% on average in the first nine months of 2013, which was less than the 21% on average level, achieved during the same period in 2012. The financial sector in the UAE witnessed a number of developments in the first nine months of 2013 compared to the same period in 2012 which have had a significant impact on the performance of the sector during that period; most notably the growth of money supply N2 by 6.1% in the first quarter of 2013, compared to the last quarter of 2012, totalling to Dh 915.3 billion. However money supply N2 growth slowed down in the second quarter of the same year, as it increased by only 1.6% compared to the first quarter of 2013, when it reverted again to again to grow by 2.7% to Dh 955 billion in the third quarter of 2013 compared to the second quarter of the same year. According to the index, the assets of banks operating in the country grew by 4.8% to Dh1877.2 billion in the first quarter of 2013 compared to the last quarter of the year., the total assets of banks operating increased slightly by 0.05% at the end of the second quarter, compared to the first quarter of the same year, to resume its rising path again in the third quarter by 1.6% to reach Dh1907.7 billion. The results of the Index noted that the capital adequacy ratio declined to 20.2 % in the first quarter of 2013, compared to 21% in the fourth quarter of 2012. Capital adequacy ratio continued to decline in the second and third quarters of the same year and remained at 19%. Bank deposits grew by 6.0% in the first quarter of 2013 compared to the last quarter of 2012, to mark Dh 1238 billion, rising by 7.1 % a year compared to the same period of the previous year. In the second quarter of 2013, the volume of bank loans and advances and overdrafts by 1.9% compared to the first quarter of 2013, reaching 1147.4 billion, increasing by 5.2% compared to the second quarter and third quarter of 2013, banks continued lending activities of up to 1178.3 billion, up by 2.7 % on a quarterly basis. UAE banks boosted allocations in the first nine months of 2013, as a precautionary measure against any shocks; as they raised allocations for faltering debts to Dh 70.1 billion at the end of the first quarter of 2013, compared to 67.9 billion in the last quarter of 2012. This was expected to further increase to Dh 75.7 billion by the end of the third quarter of 2013. With the increase of liquidity in the market, the volume of certificates of deposit (CDs) at the Central Bank to reach Dh 104.8 billion at the end of March 2013 compared to Dh 95.1 billion in December 2012, to witness a gradually decline thereafter to Dh 94.9 billion at the end of June 2013. – Emirates News Agency, WAM