#1CBUAE Classification: Public United Arab Emirates مصرف الإمارات العربية المتحدة المركزي CENTRAL BANK OF THE U.A.E. United Arab Emirates Monetary, Banking & Financial Markets Developments 2022 – 3rd Quarter Report November 2022#2CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Introduction As part of its commitment to promote economic and financial stability and growth in the UAE, the Central Bank of the UAE actively fosters a stable and efficient financial system by providing effective central banking services. The United Arab Emirates Monetary, Banking and Financial Markets Developments Report is one of the many avenues through which the Central Bank seeks to keep its stakeholders informed. This report discusses the monetary and banking activities as well as developments in the UAE financial markets during the third quarter of 2022. The report also reviews ratios of annual change over the period from September 2021 to September 2022. Monetary Developments Money Supply M1, which comprises Currency in Circulation outside Banks (Currency Issued - Cash at banks) plus Monetary Deposits, decreased by 0.4% (q-o- q) during the third quarter of 2022. On an annual basis, there was 8.2% (y-o-y) hike in the monetary aggregate M1, reaching AED 723.0 billion at the end of September 2022. Money Supply M2 (M1 plus Quasi Monetary Deposits (Resident Time and Savings Deposits in Dirham, plus Resident Deposits in Foreign Currencies)), grew by 1.4% (q-o-q) during the third quarter of 2022. On an annual basis, there was 10.7% (y-o-y) increase in Money Supply M2, reaching AED 1,645.6 billion at the end of September 2022. Money Supply M3 (M2 plus government deposits at banks and at the Central Bank) also rose by 5.6% (q-o-q) during the third quarter of 2022. On an annual basis, there was a 14.6% (y-o-y) rise in Money Supply M3, reaching AED 2,048.1 billion at the end of September 2022. CBUAE November 2022 Page 1#3CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table 1 - Monetary Developments in the UAE (In Billions Dirhams - End of Period) 2021 2022 Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter* Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Annual Money Supply (M1) 668.5 1.4% 701.9 5.0% 728.2 3.7% 726.2 -0.3% 723.0 -0.4% 8.2% Money Supply (M2) 1,485.9 -0.2% 1,563.1 5.2% 1,593.4 1.9% 1,622.2 1.8% 1,645.6 1.4% 10.7% Money Supply (M3) 1,786.9 0.8% 1,856.7 3.9% 1,885.3 1.5% 1,939.9 2.9% 2,048.1 5.6% 14.6% Source- Data received from banks operating in the UAE M₁ = Currency in Circulation Outside Banks (Currency Issued - Cash at banks) + Monetary Deposits M2 M1+Quasi-Monetary Deposits M3 = M2+Government Deposits *Estimates, subject to revision CBUAE November 2022 Page 2#4CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Banking Sector Development 1- Banks Operating in the UAE At the end of the third quarter of 2022, the number of locally incorporated banks remained unchanged at 23 banks. The branches of these locally incorporated banks decreased to 506 branches at the end of September 2022. The number of electronic banking service units of these banks rose to 44 units at the end of the third quarter of 2022. The number of Cash Offices also remained constant at 21 Cash Offices at the end of September 2022. The number of GCC banks continue to remain steady at the end of third quarter of 2022 at 6 banks, and one wholesale GCC Bank. The branches of these banks also remains constant at 6 branches at the end of September 2022. The number of other foreign banks also remains unchanged at 21 banks with 68 branches. The number of electronic banking service units of these banks increased to 22 units at the end of the third quarter of 2022. The number of cash offices of these banks also remains consistent at one cash office during the third quarter of 2022. The technological and structural advancements in the UAE financial sector has resulted in increased accessibility of mobile banking applications, online banking and ease in the use of automated teller machines (ATM) for the past several years. These improvements continue to pay off by enhancing smooth operations of the banking system. At the end of the third quarter of 2022, the number of financial institutions licensed by the Central Bank, i.e., Wholesale Banks, Representative Offices, Finance Companies, Moneychangers and Offices for Intermediating in Currency Trading & Money Market Operations reached 10, 73, 18, 86 and 3, correspondingly. The total number of ATM of banks operating in the UAE reached 4,376 by the end of September 2022. CBUAE November 2022 Page 3#5CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Locally Incorporated Banks Main Branches Additional Branches Electronic Banking Service Units Cash Offices GCC Banks (Excluding Wholesale Banks) Main Branches Additional Branches Other Foreign Banks Table-2 Banks, Other Financial Institutions & ATM 2020-2022 2020 2021 2022 Sep Dec Mar Jun Sep Dec Mar Jun Sep* 21 21 21 21 21 22 22 23 23 559 541 534 522 521 513 511 508 506 32 34 35 40 42 41 42 43 44 26 23 22 22 20 20 20 21 21 99 66 65 65 65 6 6 6 6 6 6 6 66 99 Main Branches 21 21 21 21 21 21 21 21 21 Additional Branches 73 68 68 68 68 68 68 68 68 Electronic Banking Service Units 23 23 23 22 21 21 21 21 22 Cash Offices 1 1 1 1 1 1 1 1 Wholesale Banks 11 10 10 10 10 10 10 10 10 of which GCC Banks 1 1 1 1 1 1 1 1 1 Representative Offices 86 86 83 83 81 78 77 76 73 Finance Companies 22 22 21 21 19 19 19 19 18 Moneychangers 97 97 94 93 89 89 87 86 86 Offices for Intermediating in Currency Trading & Money Market Operations 11 11 11 10 10 10 3 ATM 4,542 4,422 4,343 4,311 4,345 4,396 4,400 4,389 4,376 Source: Banking Supervision Department and UAESWITCH *Estimates, subject to revision CBUAE November 2022 Page 4#6CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] 2- Bank Assets and Loans At the end of the third quarter of 2022, total assets of banks operating in the UAE increased by 3.9% (q-o-q), reaching AED 3,583.0 billion. During the period between September 2021 and September 2022, the total assets of banks operating in the UAE increased by 10.3% (y-o-y). Gross credit increased by 0.4% (q-o-q), reaching 1,873.4 billion at the end of September 2022. On an annual basis, gross credit increased by 5.5%. 3- Customer Deposits At the end of September 2022, total deposits of resident and non-resident customers with banks operating in the UAE rose by 4.5% (q-o-q) and annually by 12.6% (y-o-y), reaching AED 2,186.9 billion. Resident deposits increased by 6.2% (q-o-q), reaching AED 1,958.3 billion at the end of the third quarter of 2022. Non-resident deposits decreased by 8.0% (q-o-q), settling at AED 228.6 billion by the end of September 2022. On an annual basis, Resident deposits increased by 15.3%, whereas, Non-resident deposits fell by 6.0%. 4- Capital and Reserves Capital adequacy ratios measure the amount of a bank's capital expressed as a percentage of its risk weighted exposures. A high capital adequacy ratio provides protection to depositors and promotes the stability and efficiency of the financial system of an economy. Effective December 2017, banks in the UAE follow Basel III principles for calculating the Capital Adequacy Ratios in line with the Regulation and Standards issued by the Central Bank. Aggregate Capital and Reserves of banks operating in the UAE increased by 3.5% (q-o-q), reaching AED 413.3 billion at the end of the third quarter of 2022. At the end of the third quarter of 2022, Total Capital Adequacy Ratio stood at 17.5%, remaining well above the 13.0% Capital Adequacy Ratio, including the 2.5% Capital Conservation Buffer requirement and the 8.5% Tier1 Ratio, prescribed by the Central Bank regulations in compliance with the Basel III guidelines. CBUAE November 2022 Page 5#7CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table- 3: Banking Indicators (End of Month, Figures in billions of Dirhams unless otherwise indicated) 2021 2022 Sep* Quarterly Change (%) Dec Quarterly Change (%) Mar Quarterly Change (%) Jun Quarterly Change (%) Sep* Quarterly Change % Annual Change (%) Total Assets 3,247.1 1.2% 3,321.5 2.3% 3,336.4 0.4% 3,449.2 3.4% 3,583.0 3.9% 10.3% Banks' Investments in Central Bank CDs & M Bills 163.9 8.8% 164.7 0.5% 163.4 -0.8% 150.9 -7.6% 145.7 -3.4% -11.1% Of which: Shariah Compliant Certificates of Deposits 55.1 -6.5% 49.1 -10.9% 44.8 -8.8% 39.0 -12.9% 25.3 -35.1% -54.1% Gross Credit (1) 1,776.5 0.4% 1,794.0 1.0% 1,831.9 2.1% 1,866.1 1.9% 1,873.4 0.4% 5.5% Personal Loans to Residents Total Deposits (2) Capital & Reserves (3) Capital Adequacy Ratio (4) 343.8 2.2% 347.6 1.1% 356.8 2.6% 361.2 1.2% 368.6 2.0% 7.2% 1,942.3 1.8% 1,996.5 2.8% 2,006.2 0.5% 2,091.9 4.3% 2,186.9 4.5% 12.6% 393.7 2.4% 402.5 2.2% 395.5 -1.7% 399.3 1.0% 413.3 3.5% 5.0% 17.7% 1.1% 17.2% -2.8% 17.1% -0.6% 16.9% -1.2% 17.5% 3.6% -1.1% Tier-1 Ratio 16.5% 1.2% 16.1% -2.4% 16.0% -0.6% 15.8% -1.3% 16.3% 3.2% -1.2% Common Equity Tier 1 (CET 1) Capital Ratio 14.7% 1.4% 14.2% -3.4% 14.2% 0.0% 14.0% -1.4% 14.5% 3.6% -1.4% (1) Includes credit to residents and non-residents: loans to non-banking financial institutions, Trade Bills Discounted and Loans and Advances to the Government and Public Sector, Private sector (corporates and individuals) in local and foreign currencies. (2) Net of inter-bank deposits and bank drafts, including commercial prepayments. (3) Excluding subordinated borrowings/deposits, but including current year profit. (4) Total Capital Ratio, Tier 1 Ratio and CET 1 Ratio for the period starting from Dec 2017 are calculated according to the Basel III Guidelines issued by CBUAE vide Circular 52/2017. Whereas CAR for period prior to Dec 2017 are according to Basel II Guidelines. *Estimates, subject to revision CBUAE November 2022 Page 6#8CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] 5- Foreign Assets of the Central Bank At the end of the third quarter of 2022, the Central Bank's foreign assets decreased by 2.1% (q-o-q), reaching AED 424.3 billion. This reduction was because of quarterly decreases in Current Account Balances & Deposits with banks abroad by 0.4% (a quarterly reduction of AED 0.9 billion) and in Foreign Securities by 6.5% (a quarterly fall of AED 8.4 billion), overshadowing the rise in Other Foreign Assets by 0.4% (a quarterly increase of AED 0.2 billion). From September 2021 to September 2022, central bank foreign assets increased by 1.7% (y-o-y).However, central bank foreign Assets decreased by 9.0% (y-t-d) from December 2021 to September 2022. 6- Abu Dhabi and Dubai Financial Markets Values Abu Dhabi's quarterly average Financial Market Index fell by 2.1% (q-o-q) during the third quarter of 2022. The quarterly average Market Capitalization of companies listed at the Abu Dhabi Securities Exchange (ADX) increased by AED 140.7 billion reaching AED 2,104.1 billion at the end of the third quarter of 2022. The Quarterly Traded Value decreased by 10.9% (q-o-q) during the third quarter of 2022 falling to AED 88.0 billion. On an annual basis, the Abu Dhabi Financial Market Index rose by 51.5%. Dubai's quarterly average Financial Market Index decreased by 1.7% (q-o-q) during the third quarter of 2022. The quarterly average Market Capitalization of companies listed on the Dubai Financial Market (DFM) increased by AED 12.7 billion reaching AED 566.9 billion at the end of the third quarter of 2022. Quarterly Traded Value decreased by 25.5% (q-o-q) during the third quarter of 2022 reaching AED 19.8 billion. On an annual basis, the Dubai Financial Market Index increased by 26.0% (y-o-y). CBUAE November 2022 Page 7#9CBUAE Classification: Public 3rd Quarter 2022 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table 4: Abu Dhabi Securities Exchange (ADX) Indicators 2020 2021 2022 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Number of listed Companies 69 69 69 73 74 76 80 82 83 86 86 General Share Price Index** 4,597.4 Quarterly Variation (%) Annual Variation Y-o-Y (%) Market Capitalization (Billion AED)** Quarterly Traded Values (Billion AED) Source: Abu Dhabi Securities Exchange (ADX) Table 5: Dubai Financial Markets (DFM) Indicators 4,219.3 -9.3% -8.2% 5.4% 2.3% -4.4% -9.3% 497.5 483.9 672.7 10.1 9.5 17.0 4,447.4 4,890.1 5,723.2 6,480.3 7,567.2 8,300.0 10.0% 17.0% 13.2% 16.8% 9.7% 12.3% -11.1% -3.3% 13.0% 34.5% 54.6% 64.3% 725.7 826.7 1,002.0 1,368.8 1,572.0 1,753.6 1,963.4 28.8 50.3 87.7 86.0 118.2 100.9 98.8 9,324.1 9,968.4 9,762.9 6.9% -2.1% 63.2% 51.5% 2,104.1 88.0 2020 2021 2022 Mar Jun Number of listed Companies* General Share Price Index** 66 67 Sep 65 Dec Mar Quarterly Variation (%) Annual Variation Y-o-Y (%) Market Capitalization (Billion AED)** Quarterly Traded Values (Billion AED) 2,383.9 2,189.9 -12.7% -17.1% 10.8% -4.4% -8.5% -13.9% 338.9 289.2 307.6 14.2 16.9 19.3 1,975.6 65 2,366.5 8.1% -17.8% 328.7 14.7 64 64 Jun Sep 64 Dec 62 Mar 62 Jun 63 63 2,585.3 9.2% -14.1% 353.9 15.4 2,737.8 5.9% -0.3% 379.0 13.0 2,792.3 2.0% 13.0% 387.1 9.8 3,044.3 3,361.4 9.0% 10.4% 25.2% 30.9% 399.2 421.6 32.2 3,430.1 3,373.4 2.0% -1.7% 27.8% 26.0% 554.2 566.9 22.8 26.6 19.8 *includes foreign companies Source: Dubai Financial Markets (DFM) **The Quarterly Share Price Index and the Quarterly Market Capitalization are measured as the quarterly average of monthly observations. ***The annual variation of the Share Price Indices are measured as the yearly averages of monthly observations. 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