Daily Personal Finance Insights – Savings rates down

Daily Personal Finance Insights – Savings rates down
19 March 2013

Savings depleted… again!

The UAE Central Bank confirmed further falls in the deposits of savers across the nation. Money supply aggregate monetary deposits (resident time and savings deposits in Dirhams, commercial prepayments in Dirhams and resident deposits in foreign currencies), decreased by 0.6%, from AED 867.5 billion at the end of November 2012 to AED 862.4 billion at the end of December, the latest announced numbers.

Resident deposits and non-resident deposits decreased by 1.3% and 0.8%, respectively.

Loan impairments increase

Standard Chartered Bank has indicated a significant increase in loan impairments, by US $313 million, or 34%, to $1,221 million. They state an impairment increase of US $140 million related to a small number of large exposures in India and the UAE. Although they do emphasize asset quality across the businesses remains good; their annual report states: “we have prudently increased the number of clients we are monitoring more closely reflecting continuing economic uncertainties.”

Focus on high quality dividend yields

According to Abu Dhabi Islamic Bank, now is a good time to focus investments on high quality stocks that pay dividends. As the UAE’s Central Bank has synchronized its policy with the US Fed (due to the dollar peg), deposit profit rates have fallen substantially. For example, one year term deposit rates in the UAE have fallen to less than 1%. On the other hand, improvement in the macroeconomic environment and business conditions has helped equity investors in the UAE to realize higher dividend yields.

ADIB says: “While high dividend yielding stocks are an attractive investment option in the UAE, we recommend investors focus on high quality dividends. Based on our analysis of the UAE equity market, we have identified certain stocks that fulfil the ‘high quality dividend yield’ criteria.” A list of those stocks can be found here.

Strong growth for Abu Dhabi banks

The banking sector in Abu Dhabi showed consistent increases in liquidity and net profits throughout 2012, largely aided by net-interest earnings and bigger profits from Islamic finance. Fourth-quarter results and a strong performance by many banks’ shares – the strongest in five years – have led many analysts to conclude that the sector is firmly on the path to recovery.

These increases came largely on the back of higher interest income and Islamic banking, which each grew 9% in 2012.

H.O.P.E for financial management

Global money transfer company, Xpress Money, unveiled H.O.P.E - a sustainable corporate responsibility initiatives platform that will focus on inclusive social intervention and community support programmes across the world. H.O.P.E signifies Xpress Money's commitment of 'Helping Our People and Environment' with the first phase focusing on GCC, Asia, and Asia Pacific.

"H.O.P.E is our endeavour to bring more focus and sustainability to our CSR programmes. For instance, financial literacy and inclusion will focus on enabling the wives of migrants to start earning a livelihood on their own by helping them set up micro businesses as well as provide them with basic financial education," said Mr. Vinesh Nair, Vice President - Global Marketing & Communications at Xpress Money. Initiatives such as financial management courses across labour camps in the Kingdom of Saudi Arabia have already been conducted.

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Head of Behavioral Finance
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