The combined assets of UAE banks declined by nearly Dh17 billion in May, the first drop in the first five months, while lending and provisions increased. Deposits shrank by around Dh13 billion for the second consecutive month.

From a record high of Dh1,742 billion at the end of April, the total assets of the country’s 23 national banks and 28 foreign units dropped to Dh1,725 billion at the end of May, the Central Bank said in its monthly indicators.

Despite the decline, the UAE maintained its position as having the largest Arab banking system in terms of assets and capital, which stood at Dh277 billion at the end of May, slightly down from Dh278 billion at the end of April.

The report showed deposits receded to Dh1,125 billion at the end of May from Dh1,138 billion at the end of April.

Credit recovered in May after slackening in April, growing to nearly Dh1,074 billion from Dh1,072 billion at the end of April. Personal loans edged up to about Dh256.3 billion from Dh255.9 billion in the same period.

The report showed UAE banks are pursuing their post-crisis provision building policy, with their combined NPL provisions rising to nearly Dh61.7 billion at the end of May from Dh60.3 billion at the end of April, an increase of Dh1.4 billion through the month. The increase raised to Dh6.4 billion the total loan loss provisions allocated by banks in the first five months of 2012 and nearly Dh17.4 billion since the end of 2010, according to the Central Bank.

Capital adequacy was put at 20.9 per cent at the end of March, one of the highest levels in the world, showed the report which gave no data for May.