Banks May Suffer Real Estate Heat

UAE banks can gradually feel the heat of the possible medium-term risks, brought out by the increasing share of real estate assets , along with the rising inflation. In addition, a real estate shortage of supply and the low interest rate environment is now pushing for a cycle of asset price increases.

The unprecedented growth in real estate prices has encouraged the practice of using personal loans to purchase off-plan properties for a small down-payment and ride the wave of the price appreciation powered by leveraged returns.

This exposure is hard to separate from the personal loans numbers reported from the banks and could be an additional exposure to the real estate sector.

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Survey: UAE Banks Extend Good Performance

UAE banks will surely make it better in 2008 as they were being praised for a good performance last year, survey said.

Fitch said it expects banks to perform strongly in 2008, given that performances rely heavily on core banking activities, and also in the light of continuous strong demand for credit.

Despite sector loan growth of 40 percent in 2007 and strong growth in prior years, asset quality remained sound in 2007, Fitch noted.

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