Emirates NBD Eyes 40% Retail Lending Boom

Emirates NBD, Dubai’s largest lender, expects its retail lending to jump between 25 and 40 per cent in 2013 as consumer confidence returns in the United Arab Emirates, its retail banking head said on Monday.

Cautioning that the numbers were coming off a low base after two years of weak growth, Suvo Sarkar said a rise in lending was occurring across all sectors – with mortgage lending forecast to double this year and credit card spending, the average amount spent on each transaction, expected to rise 20 per cent.

ENBD presently generates around 95 per cent of its revenue from its home market, although it is hoping to increase its international business to 15-20 per cent in five years, helped by acquisitions such as of BNP Paribas’ Egyptian assets, its chief executive told Reuters in November.

Dubai’s economy boomed in the mid-2000s but suffered a major set-back in the last two years of the decade as a real estate bubble burst, sending prices down more than 50 per cent. Defaults on personal lending shot up and government-related entities were forced to restructure billions of dollars of debt.

However, there have been signs of recovery since last year, with property prices rising again and the Dubai stock market hitting a 40-month high on Thursday.

Lessons have been learnt from the bad times, Sarkar said.

“All the banks are far more prudent than five years back – you won’t see the madness we saw before,” Sarkar said on the sidelines of a retail banking conference in Dubai.

The more careful approach to lending has also been forced upon banks by a more cautious regulatory regime, including the introduction of caps on personal lending.

New limits on mortgage lending in the United Arab Emirates, originally announced last December, caused a furore as bankers and property developers complained they would extinguish the real estate sector’s recovery. The central bank cancelled its original plan and last month agreed to somewhat softer loan-to-value ratios proposed by the local bank industry body.

Sarkar said he expected the new mortgage rules to be in place by the end of this year, adding that the regulation would be positive for the banking sector as it would make customers more rational about how much debt they took on.

ENBD is due to report first-quarter earnings on April 25; the average forecast of three analysts is for the bank to post a 5.4 per cent rise in net profit versus the same quarter last year.