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UAE banks' provisions increase 178%
posted on 08/11/2009
 Nine-month provisions for 19 banks listed on UAE stock exchanges were up more than 178 per cent year-on-year while net profits fell 13.7 per cent at the end of the third quarter, Emirates Business research reveals.
Combined provisions of the 19 banks analysed by this paper rose to US$2.2 billion (Dh8.2bn) in the nine-month period ended September 2009, from US$801 million in the corresponding period of 2008.
Leading the charge is Commercial Bank of Dubai saw provisions balloon by 913 per cent in the nine-month-period ended September 2009 compared with the same period of 2008, followed by Emirates Islamic Bank (provisions up 796 per cent) and Mashreq (up 410 per cent).
In value terms, Emirates NBD, one of the country's largest lenders by market capitalisation, incurred the largest provisions at US$552.7m in the first three quarters of 2009, followed by Mashreq (US$375.4m) and Abu Dhabi Commercial Bank (US$338.9m).
Thirteen of the 19 banks analysed saw their provisions rise by more than 100 per cent, indicating the extent of the hit the country's banking sector has had to endure owing to the global economic crisis.
Sharjah Islamic Bank and Bank of Sharjah are the only two banks to have reduced their provisions from last year, recording a decline of more than 76 and 26 per cent, respectively, in provisioning this year.
Exposure to the double-defaults by Saudi Arabia's family-owned Saad and Algosaibi groups has added to the steadily climbing individual and commercial default rates in the region, which add up to the massive rise in UAE bank provisions this year.
Expectedly, rising provisions have impacted the profit margins of the banks, with the combined profits of the 19 banks analysed fell 13.7 per cent to US$4.2bn in the nine-month period ended September 2009, from US$4.8bn in the corresponding period of 2008.
Dubai-listed Ajman Bank was the only bank in the sample that made a loss of US$8.5m in the nine-month period this year compared with a profit of US$2.8m during the same period in 2008, according to the research.
Other banks that saw a major drop in their net profits include Commercial Bank International (down 71.5 per cent), Emirates Islamic Bank (-68.2 per cent) and Abu Dhabi Commercial Bank (-54.5 per cent).
Analysts believe that there could be further provisioning in the fourth quarter of this year, which is bound to further impact profitability of the country's banking sector.
According to Central Bank data, specific provisions for non-performing loans by banks in the UAE stood at Dh27.8bn (US$7.6bn) at the end of September 2009, up 49 per cent from Dh18.6bn in September 2008.
General provisions, on the other hand, have gone up by more than 102 per cent, from Dh4.4bn in September 2008 to Dh8.9bn in September 2009, according to Central Bank statistics.
Loans and advances (net of provisions) are up just 6.7 per cent, from Dh956.7bn to Dh1.02 trillion in the same period. – Emirates Business 24|7
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