Provisions in the UAE banking sector have fallen for the first time since 2008 in October, according to the latest figures released by the central bank.

The small drop in provisions is not expected to indicate a significant turnaround in the banking sector though, with some analysts expecting problem loans to continue eating into profitability in 2013. It may still signal that the banks have now dealt with the worst of the debt problems brought on by financial crisis and that a turnaround is on the horizon.

Total provisions fell from AED83bn in September to AED82.7bn, after small declines in both provisions for specific non-performing loans, and general provisions put aside in the expectation of future specific provisions.

Loan growth in October was flat, while deposit growth was 1.6 per cent. Credit growth has been weak throughout 2012 as banks concentrate on building up their deposits and remain largely risk averse.