GULF STATES| ECONOMICS & FINANCE
Loans get cheaper in UAE
The Central Bank of the UAE on Wednesday said that it was cutting interest rates applied on the issuance of certificates of deposits starting from Thursday, immediately following the US Federal Reserve’s decision to cut rates by 25 basis points – the US central bank’s first such move since the financial crisis of 2008. The UAE central bank said in a statement its repo rate for borrowing short-term liquidity had also been cut by 25 bps, effective from Thursday. Lower interest rates, when passed on to the consumer, would mean lower cost of borrowing money, thereby making loans cheaper. Central banks in Saudi Arabia and Bahrain followed the move, cutting their rates by the same margin. Their currencies are pegged to the US dollar and they follow the Fed on interest rate moves. The Saudi Arabian Monetary Authority said it had cut its repo rate, used to lend money to banks, to 275 basis points from 300 bps, and the reverse repo, the rate at which commercial banks deposit money with the central bank, by the same margin to 225 bps. The Central bank of Bahrain decided to cut its one-week deposit facility to 2.50 percent from 2.75 percent. It also reduced the overnight deposit rate to 2.25 percent from 2.5 percent, and the lending rate to 4.25 percent from 4.5 percent. The Fed cut interest rates, citing concerns about the global economy and muted US inflation, and signalled a readiness to lower borrowing costs further if needed. Financial markets had widely expected the quarter-percentage-point rate cut, which lowered the US central bank’s benchmark overnight lending rate to a target range of 2 percent to 2.25 percent.
DIFC courts expand scope of wills services
The DIFC Courts has announced changes to the rules of wills registrations, which will now accommodate all resident and investor assets across the emirates, as well as assets held outside the UAE. Effective from July 1, 2019, the Courts’ Wills Service Centre also confirmed that existing wills registered with the courts can be amended free-of-charge until August 31, 2019, to include UAE-wide assets and assets outside the UAE. Zaki bin Azmi, chief justice, chief registrar, said: “With almost eight million expatriates residing in the UAE, the Government of Dubai and the DIFC Courts recognised the need for an innovative legal solution for non-Muslims that provides peace of mind for residents and investors, as well as enhance Dubai and the UAE’s attractiveness as a destination for expatriate talent and investment. Recognising the increased demand, we have now amended our rules to expand the remit of this public service to assets across all the emirates of the UAE and beyond.”
Emirates NBD closes $2.8b DenizBank buy
Emirates NBD said on Wednesday it has completed the purchase of 99.85 percent of the shares in DenizBank of Turkey from Russia’s Sberbank. The transaction is valued at $2.8 billion as per the revised sale price as the lira depreciated in April. Emirates NBD CEO Shayne Nelson said the Dubai-based bank would support Denizbank if it needed a capital increase. Speaking at the signing ceremony of Sberbank’s sale of its shares in Denizbank to Emirates NBD, Nelson said that NBD is a long-term investor in Turkey. In April, Emirates NBD said it was buying Denizbank from Sberbank for 15.48 billion lira ($2.8 billion), lower than a previously agreed price. Turkey’s BDDK banking watchdog approved the transaction in June and the sale was completed on Wednesday. Hesham Abdulla Al Qassim, Vice Chairman and Managing Director, Emirates NBD, said the lender is proud to mark a new chapter in its growth journey by welcoming DenizBank to its family. Herman Gref, CEO, Chairman of the Executive Board of Sberbank, said since 2012, DenizBank has made meaningful progress across all key areas, delivering growth in sales of products and services via digital channels, implementation of advanced risk management practices and risk culture improvement, and the ability to shape a unique customer experience, maintain a balanced financial structure and meet the external challenges with confidence. Gref said number of DenizBank clients more than doubled during seven years and the assets increased more than 3.5 times. “With the sale of DenizBank, Sberbank has completed a key stage in their international strategy change that will allow the bank to concentrate on the further development of Sberbank’s ecosystem in Russia,” said Gref. Al Qassim said while there is considerable cross-border trade and business activity across the Menat region, only few banks can claim to have a strong pan-regional presence.
UAE’s credit demand picks up pace
Gross credit growth in the UAE accelerated 0.7 percent month on month 4.3 percent year on year in June, according to the latest central bank data analysed by Abu Dhabi Commercial Bank (ADCB’s) Economics Team. “The monthly expansion in June was the strongest level seen so far this year, though could have been partly due to some pent-up demand among corporates following the generally quieter period during Ramadan (which fell in May),” said Monica Malik, Chief Economist of ADCB. Data showed the strongest monthly growth in credit was from the government-related entities (GRE) (1.7 percent month on month) and private businesses (1.1 percent), whilst government gross loans contracted by 1.6 percent. The pace of monthly credit growth averaged 0.4 percent month on month in the first half of 2019, in line with the same period in 2018, though the drivers have shifted. GREs witnessed the strongest credit growth YTD (year to date) of 5.3 percent after contracting by 2.6 percent in 2018. “We believe that this potentially reflects some progress being made with projects in Abu Dhabi and greater investment activity in Dubai to complete infrastructure ahead of Expo 2020. However, the domestic and external economic challenges are reflected in the deceleration in private sector credit demand,” said Malik. Data showed, private businesses’ credit growth has moderated from end-2018, while retail has contracted by 1.5 percent year on year and YTD. Retail credit was flat in June after contracting in monthly terms in the first five months of 019, though we await further data to confirm a stabilisation.
Passenger traffic more than doubles at DWC
Passenger traffic at Dubai World Central (DWC) more than doubled in the first half of 2019 as many flights had to be diverted there while a runway was closed at the city’s main airport. Operator Dubai Airports said passenger traffic jumped to 1.2 million from 517,813 in the same half of 2018. This was during a 45-day closure of the southern runway at Dubai International Airport from April 16 to May 30. More than 900,000 of the 1.2 million passengers in the first half were recorded in that 45-day period, or the equivalent of the airport’s entire annual passenger traffic in 2018. “The 45-day period was a major challenge for DWC as the airport had to accommodate a massive spike in both passenger and flight traffic — going overnight from 10 flights a day to 80 flights on peak days,” said Paul Griffiths, chief executive officer of Dubai Airports. Russia was the top destination country in the first six months of the year, followed by Saudi Arabia, India, and Germany. For cargo, however, DWC saw a year-on-year decline of 5.3 percent, handling 450,000 tonnes of freight in the first half of 2019. The operator attributed that to “softening of the overall air cargo market.”
Dubai investments first half net profit falls
Dubai Investments said on Thursday its net profit for the first half to June fell 39 percent to Dh353 million due to gains from merger and acquisition. The company made a gain of DhDh64 million due to (M&A) in the first half compared to a gain of Dh333 million in the same period last year. Profits for first half without considering these exceptional items has increased by Dh131 million when compared to the previous period. The company reported a net profit of Dh151 million for the second quarter of 2019, an increase of 17 percent when compared to the same period last year. The company
’s total assets grew by Dh1.09 billion during first half of the year and reached Dh20.65 billion as on June 30. The annualised return on equity for the period was 5.9 percent. Khalid Bin Kalban, Managing Director and CEO of Dubai Investments, said: “Dubai Investments has demonstrated its ability to generate strong performance consistently, despite the challenging economic environment. This is due to the group’s resilient and diversified nature, enabling delivery of sustainable results”.
UAE expat and retiring in Abu Dhabi? real estate investment is key
The capital’s real estate offerings, the UAE government’s new retirement visa rules and new laws on freehold ownership for expats in the capital are helping shape the emirate as an ideal retirement destination. Previously, expats in Abu Dhabi could only buy real estate on a 99-year lease. The new freehold law announced at Cityscape Abu Dhabi in April essentially opens the capital to a whole new segment of buyers and investors in real estate, including those in search of a retirement home. According to this law, foreigners can now own property in specified areas without time limitations, just like UAE nationals. “Looking at Abu Dhabi as a place to retire makes sense since it is relatively laid-back with a relaxed pace of life and has a cultural touch to it,” says Lynnette Abad, director of research and data at the Property Finder Group. “It would be interesting to see the outcome of the feasibility studies for retirement communities in Abu Dhabi, such as the very popular Sun City model in the USA. These are master-planned communities for age 55 and above, with all the facilities and amenities one would want when they retire, including a huge social aspect to the community.” Although Abu Dhabi is surrounded by water, Andrew Covill, director of Henry Wiltshire International, notes that it had been hard to buy a villa on the sea, and virtually impossible as an expat. The Hidd Al Saadiyat project has changed that.