A quarter of Mashreq Bank’s retail customers have availed of government-led relief measures to ease their financial burden during the pandemic, a senior executive said.

The lender has also registered a drop in new retail business, with customers trying to conserve their cash to ride out the economic slowdown brought about by Covid-19.

"We have gone ahead and delivered on the central bank's guidelines, but we have also proactively gone beyond that," Subroto Som, senior executive vice president and head of Mashreq's Retail Banking Group, told The National.

“Today, almost a fourth of our customer base has availed them [support packages] and I’m sure it [the number] will go up in the near future.”

Mashreq, one of the oldest lenders in Dubai, said it received requests for payment holiday, mostly from its credit card customers.

“I am talking primarily about the retail banking … so the credit card and personal loan [business] happens to be big [in terms requests for relief]," Mr Som said.

"We also have relief offered and accepted by our mortgage customers … so it is across all segments [of retail banking].”

Mr Som said that even customers who have not been severely affected by the pandemic were opting to use the support packages as they try to conserve resources.

Mashreq’s business banking arm is also extending support to its clients affected by the crisis, including some of the small and medium-sized enterprises.

Banks in the country are offering loan repayment holidays, lower interest rates and reduced fees and charges to clients to help soften Covid-19's blow.

Retail loan customers placed on unpaid leave by their employers can approach the banks for payment holidays, with zero interest and fees.

Those who have taken out personal or car loans or mortgages can apply for a one-month repayment holiday with no fees.

Other support measures include interest-free instalment plans on credit cards for all school fees, and repayment deferrals.

The support initiative from lenders comes after the UAE Central Bank's Dh256bn stimulus package introduced in March.

This included a Dh50bn Targeted Economic Support Scheme of collateralised, interest-free loans offered to banks to extend to customers, as well as a loosening of requirements on capital and liquidity buffers that banks need to hold.

About 77 per cent of the initial Dh50bn made available has now been drawn down by banks, and all financial institutions are required to "consider the specific circumstances of [affected] borrowers to receive a deferral of repayment within the Tess," the regulator said.

The financial repercussions of the pandemic on Mashrew are still unfolding. Like its peers in the UAE, the lender is looking at a loss of income partly as a result of the support provided to its customers.

Mr Som said there is an overall slowdown in business, as customers opt not to remit a lot of money home, take out new loans or make new investments.

“I think there will be a drop in new business in the retail sector across our bank and [the wider banking] industry,” he said.

Mashreq’s retail business book accounted for 9 per cent of the bank’s total assets of Dh162.6 billion at the end of March and 26 per cent of its operating income of Dh1.52bn for the same period, according to its results.

The lender reported a 16.5 per cent year-on-year decline in net interest income during the quarter as the UAE Central Bank cut rates in line with the US Federal Reserve.

“End of the year, we will certainly see some decline and next year we will see a rise [in the retail book],” he said.

“There’s so much uncertainty … anything I say today will be out of context very soon,” he said.

He declined to put a percentage on the potential drop.

Retail loan losses across the industry are also expected to rise this year, as the impact of job losses becomes more pronounced.

The timetable of relief packages for customers, the state of employment and the momentum of the country’s economic recovery will determine the extent of loan losses, he said.

The biggest risk the retail lending space currently faces is unemployment, with job losses expected in sectors such as aviation, retail, tourism and hospitality, and small businesses.

Mr Som believes job losses "will be the single-biggest driver of our loan loss increase”.

Mashreq is cautious about extending personal finance solutions to people employed in the sectors most affected by Covid-19, which resulted in movement restrictions and the closure of all non-essential businesses in late March and early April.

However, economic activity is gradually picking up as the government allowed malls, restaurants, cafes and other businesses to open, in accordance with strict guidelines.

The UAE has so far recorded 29,485 Covid-19 cases and 245 deaths, while 15,056 patients have recovered from the infection as of Sunday.

Globally, coronavirus cases passed 5.3 million, with more than 342,000 deaths and about 2.1 million recoveries, according to Johns Hopkins University.

Mr Som said Mashreq was "well under way" with a Dh500 million programme announced at the end of 2018 to digitise its operations, including its branch network, and could complete the work sooner than expected.

“I don’t think we need more money … the project could finish early, quicker than five years. That is most likely to happen.”