...High Growth in UAE Islamic Banks' Assets and Loans Increasing Systematic Importance: The Islamic finance sector continued high growth in 2015. The six largest Fitch-rated Islamic banks' share of total bank gross loans was around 21%, up 3% in 1H15, and around 20% by total assets up 3.4% at end-1H15. We expect loan demand at UAE Islamic banks to continue, supported by wider acceptance and increasing customer base. Weaker but Fast-Improving Asset Quality: The Islamic banks' impaired loans/gross loans ratio was 5.3% at end-1H15, down from 11.5% at end-2012. Significant improvement continues, assisted by high growth rates, but asset quality remains weaker than the conventional banks' average of 4.6%. This is partly due to Islamic banks' relatively large proportion of retail loans (including personal residential mortgages) of more than 40% at end- 2014, which increases their vulnerability to a cyclical downturn relative to conventional banks. The higher impaired loan ratio is also due to Islamic...
