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UAE bad loan provisions drop for first time since '08
Published in The Saudi Gazette on 27 - 12 - 2012

DUBAI – Outstanding provisions for bad loans set aside by banks in the United Arab Emirates fell in October for the first time since the global financial crisis began building in 2008, central bank data showed Wednesday.
The small drop does not indicate an end to the corporate debt problems that have weighed on UAE banks' earnings over the past several years. But it does suggest the banks are over the worst of those problems, helped by solid economic growth and a fledgling recovery of Dubai's real estate market.
Provisions set aside for specific non-performing loans edged down to AED65.3 billion ($17.8 billion) at the end of October from AED65.4 billion in September, the data showed.
The official WAM news agency said it was the first time since 2008 that provisions had dropped. In October 2011 they stood at AED51.9 billion and at the end of 2008 they amounted to AED 19.7 billion, according to the central bank.
General provisions earmarked for other purposes by the 23 UAE-based banks and 28 units of foreign banks also fell slightly in October to AED17.4 billion from AED 17.6 billion in September; they totaled AED 15.4 billion in October 2011.
Banks in the UAE were hit first by the global financial crisis, then by the Dubai corporate debt disaster of 2009-2010, when the emirate's real estate market crashed and conglomerate Dubai World asked to restructure $25 billion of debt.
The debt problems have not yet been fully worked through. For example another investment conglomerate, Dubai Group, is still struggling to restructure $10 billion of debt, and it is not clear whether banks may have to take further provisions against that debt.
Early this month, credit rating agency Moody's Investors Service downgraded ratings of three Dubai banks including the emirate's biggest, Emirates NBD. It cited large amounts of problem loans and said the banks had low levels of balance sheet coverage for loan losses and would need additional provisioning. — WAM


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