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Lending by the UAE's largest banks is falling short of industry estimates, as slower growth in the second-largest Arab economy damps credit demand, Bloomberg has reported. Combined lending by the top seven banks climbed 0.6% in the first quarter to Dhs749.5bn ($204bn), according to their earnings statements. Morgan Stanley and Cairo-based EFG-Hermes both forecast a 5% increase in loan growth in 2012. That would be the slowest growth rate in the six-nation GCC and is below average forecasts for the Middle East, Latin America, Asia and the BRICS group of emerging markets, the forecasts show. A 29% drop in lending rates last year has squeezed the margins the nation's top-four banks get from interest on loans.