Emirates NBD expects sharp drop in retail loan growth in 2017

Emirates NBD (ENBD), Dubai’s largest bank, expects loan growth within its retail business to halve next year to around 5 per cent as the market slows, its retail and wealth management head said this week.

The bank’s consumer lending book has grown by 10 per cent since the end of 2015. ENBD is aiming for full-year loan growth of mid to high single digits next year across the bank.

“Single digit for next year is what most in the industry expects and I expect us to lead the industry and I hope we will continue to gain market share,” Suvo Sarkar, senior executive vice president and group head of retail banking and wealth management at Emirates NBD, said in an interview.

“That’s pleasing for us in a situation of a relatively slow market.”

Banks in the United Arab Emirates have been hit by tougher operating conditions following the collapse in oil prices that has fed through into higher levels of bad loans and also a squeeze on net interest margins.

Speaking during the bank’s third-quarter results call, ENBD group chief executive Shayne Nelson said the bank was seeing a higher incidence of impairment charges in its micro- small- and medium-sized business and retail divisions.

Sarkar said he did not expect a further rise in impairments within the SME sector. “There will be another 12 months of a difficult situation for the SME sector. There’s some pain to go but the worst is over.”

He said data from the UAE’s federal credit bureau, set up last year, had helped the bank to navigate the uncertain economy. Since launching in November 2014, Al Etihad Credit Bureau has allowed banks to access data on consumers at other financial institutions when making lending decisions, giving banks a clearer picture of the level of indebtedness and financial history of borrowers.

“For the new business we’ve booked in the past four quarters, we’ve seen far better delinquency behaviour,” he said.

Sarkar also said that making use of the information was also a reason for the lower new lending growth rates. Within the retail segment, the bank’s approval rates on new business had dropped off by 10 to 15 per cent, he said.