Good old bank deposits add to abundant liquidity in Middle East

Dubai: Citibank’s clients are ploughing back cash in good old bank deposits amid volatile market conditions even as real estate sector continues to remain sluggish and yields are difficult to get elsewhere, Dinesh Sharma, managing director and head of consumer banking, Middle East region of Citibank, told Gulf News.

The bank witnessed a surge of 18 per cent in its deposits last year, not seen in many years, and are continuing to maintain pace, a trend that is seen at other banks in the region.

“The surge is due to volatility. The rates have been strong as dollar rates have firmed up over the last couple of years. The banks have passed on some of the rate benefits and as result of that customers are able to make decent returns on their deposit,” Sharma said.

This trend reminded Sharma of the situation a decade ago. “In 2008-09 when markets softened up our deposits went up significantly because it goes to the principle of flight to quality.”

The trend of a surge in deposits is similar to what other banks in the region have been witnessing. Overall on a macro level, deposits are even coming from the government related enterprises. Deposits across the UAE banking system rose 0.9 per cent month on month in June to be at Dh15.4 billion.

As a result, the yearly growth rate ticked up to 5.3 per cent year on year from 5.2 per cent in the previous month. The rise in June deposits was largely driven by a 15.9 per cent month jump in GRE deposits, with the government and private sectors seeing a monthly fall.

But, falling rates may not keep these deposits coming in at the same pace. The US Federal Reserve cut its benchmark policy rate a quarter of a point to a range of 2-2.25 per cent on July 31, and analysts expect the central bank to ease policy substantially more from here amid growing trade tensions with China.

US president Donald Trump has publicly called for Federal Reserve Chairman Jerome Powell to cut the rates.

The credit card business has been robust for the bank despite a sluggishness at other banks.

“The credit card business grew by 11 per cent in terms customers and this year we are on track to grow by a similar percentage. The overall market is flat to down for credit card business,” he said.

“On the credit side, while the overall market growth has been a bit sluggish we continue to witness a solid growth. This is driven by picking up market share, and smoothening our process,” Sharma added. As a result, the bank witnessed a 32 per cent growth in new customer acquisition.

“Part of the softness in credit update overall is market adjusting to guardrails along debt burden ratio’s, maximum tenors and bureau availability. With EXPO 2020 there would be a lot of influx of people more moving in and that should help drive further growth,” he added.

Digitisation — ‘a blessing in disguise’

Citibank Middle East has been investing a lot in digitising its operations to enhance the experience for its clients.

“Digitisation is a blessing in disguise. As a bank we can’t compete in terms of number of branches, and infrastructure. You can reach your customer as quickly as any other bank. We have been on this journey for a couple of years and want to be where our customers are,” Sharma from Citibank said.

Banks in the UAE and in the region have been investing heavily in digitisation. Mashreq plans to invest Dh500 million over the next five years on digitisation as it plans to shut half of their branches.

“We [at Citibank] are on our journey to ramp up our digitisation capabilities. We would be ramping it up significantly to take it to the next level. We would introduce features so that our customers get access to us. We would introduce features so that our customers get access to us and bank from wherever they are,” he said.