#UAE banks reap the DEWA IPO windfall, and there are more coming | Banking – Gulf News

UAE banks reap the DEWA IPO windfall, and there are more coming | Banking – Gulf News

UAE banks are witnessing a surge in lending and deposit growth following the opening of the DEWA IPO on March 24. The IPO subscriptions by both individual and institutional investors have seen a flood of liquidity flowing into the banking system and, at the same time, a surge in high-yield lending to investors who are keen on IPO subscriptions.

UAE banks that have a significant share of funding (more than 60 per cent) through current and savings account (CASA) deposits are reaping the benefits as investors park their savings in banks for subscribing to DEWA and other IPOs that are in the pipeline. Bankers said they have seen customers moving savings from their offshore and overseas accounts to local banks. In addition, the IPO demand from GCC and expatriate investors is also bringing in large inflows of deposits.

Low-cost funding

CASA deposits are the cheapest funding source after Islamic deposits for UAE banks. These deposits offer zero or marginal yields to depositors, while banks deploy these at rates ranging from 5 to 10 per cent in short-term IPO (leverage) financing. Although a part of these deposits are likely to flow out after the IPO share allotment and listing, bankers say a good portion will likely remain with the banks.

“Although deposited for a special purpose, we expect some of these deposits to be sticky as investors want to be prepared for future IPOs,” said the chief financial officer of a local bank.