UAE set to become dominant banking force

Abu Dhabi, July 4, 2008 (WAM) - A rapid growth in credits and other
financial operations have coupled with an ongoing capital increase drive to turn the UAE into the largest banking sector in the Arab world, overtaking Saudi Arabia in almost all banking components.

At the end of March, the United Arab Emirates emerged with the dominant Arab banking sector in terms of assets and most of their components, including loans and advances,
deposits, capital and financial reserves.

Official figures showed the combined assets of the UAE's 52 commercial banks
peaked at nearly Dh1.34 trillion, more than triple their level in 2004, when
they stood at around Dh442 billion according to a report in 'Emirates
Business 24|7'.

Bank assets in Saudi Arabia, which had long dominated the Arab banking
system, stood at around SAR1.17trn (Dh1.15trn) at the end of March. They
grew to SAR1.2trn at the end of May but remained below the UAE bank assets,
said central banks of both countries.

The UAE overtook Saudi Arabia as the Arab world's largest banking system at
the end of 2006, when its assets stood at Dh865.9bn. The assets of the Saudi
banks were around SAR861bn.

The gap began to widen in 2007 as a result of a sharp growth in the UAE bank
credits, deposits, capital and other financial operations. At the end of
2007, bank assets in the UAE stood at Dh1.23trn, while they were estimated
at SR1.07trn in Saudi Arabia.

A breakdown showed there was a rapid growth in most UAE bank activities due
to the surge in the economy and projects, with loans and advances leaping to
Dh792.7bn at the end of March from around Dh720bn at the end of 2007 and
Dh515.3bn at the end of 2006. They were estimated at Dh426bn at the end of
2005 and Dh312bn at the end of 2004. Deposits jumped to Dh773.5 billion by
the end of March from Dh720bn at the end of 2007 and around Dh558.2bn at the
end of 2006.

A drive to expand their capital base in line with Central Bank instructions
boosted the UAE banks' shareholders equity to a record Dh141.1bn at the end
of March from Dh116.3bn at the end of 2007.

The Central Bank gave no figures for the first half of the year but bankers
said the capital had risen by around five per cent as more banks have
boosted reserves.

In comparison, Saudi Arabia's bank loans and advances to the private sector
grew to SAR673bn at the end of May from SAR577bn at the end of 2007 and
around SAR476bn at the end of 2006, according to the Saudi Arabian Monetary
Agency (Sama). Deposits surged to a record SAR769.9bn at the end of May from
SAR717.5bn at the end of 2007 but they remained far than those held by UAE
banks.

Sama's figures showed Saudi Arabia's combined bank capital and reserves were
also below than those in the UAE, standing at SAR127.2bn at the end of May.
In terms of net profits, they were higher in Saudi Arabia as they stood at
around SAR30.2bn in 2007 compared with Dh24.5bn in the UAE. "This is normal
considering the fact that the Saudi market is much bigger than the UAE
market… you have to take into account the population and the gross domestic
product of that country," a UAE banker said.

Official figures showed Egypt was ranked third in terms of Arab bank assets,
which stood at around Dh702bn at the end of May. It was followed by Kuwait,
with bank assets of nearly Dh485 billion. At the end of 2006, the combined
Arab banking sector's assets totalled around US$1.268 trillion. –