Home RSS
Real Estate
Cars

'Speculative' property loans may double UAE banks' bad debt: IIF

Vicky Kapur Emirates 247
Loans to the real estate sector and highly leveraged companies have eroded asset quality of UAE banks. (FILE)

Loans to the real estate sector and highly leveraged companies have eroded asset quality of UAE banks. (FILE)


Overexposure to the "highly speculative" real estate sector and highly leveraged companies has eroded asset quality of UAE banks, and the percentage of bad loans on the country's banks' books could go up to as much as 10 per cent, according to the Washington-based Institute of International Finance (IIF).



The ratio of non-performing loans (NPLs) to total loans has almost doubled from 2008 to 2009 in Kuwait and the UAE, and is expected to increase further this year, the IIF maintains in its regional overview of the GCC economies.

The institute reckons that the UAE's NPL ratio, which was at 2.5 per cent in 2008, surged to 4.8 per cent in 2009 and is forecast to reach 8.2 per cent by the end of this year. It could rise even further next year but are likely to remain below 10 per cent, according to Dr Garbis Iradian, Deputy Director (Africa/ME Department) with the IIF, and co-author of the report.

"The balance sheet of many UAE banks, especially those in Dubai, have large exposures to the real estate sector and also Dubai World and other government-related entities that are facing problems and might go for some kind of [debt] restructuring," Dr Iradian told Emirates 24|7during his recent visit to Dubai. "That could affect the balance sheet of major banks," he added.

He said that while the actual level of NPLs depends on the economic recovery, "it would be highly unlikely that the NPLs would exceed 9 or 10 per cent next year. I would say they would remain between 8 and 10 per cent," he said.


Source



Add your comment
  Anonymous comment
Nickname:
Password:
  Remember me on this computer

Title:
Send me by email any answer to my comment
Send me by email every new comment to this article





 
_________________________________________________________________________
 
Disclaimer: The information presented and opinions expressed herein are those of the authors and do not necessarily represent the views of Estates Report and/or its partners.