Bank stops lending to expat staff of real estate firms

BANK DECISION: Emirates NBD has suspended credit facilities to expat staff at 12 real estate companies. (Getty Images)

Emirates NBD, the largest bank in the UAE by market value, has stopped lending to expat employees of leading real estate companies in the region on fears of further job losses in the sector, it emerged on Thursday.

Arabian Business has obtained a copy of an internal email sent to hundreds of bank staff instructing all its branches and sales departments to suspend credit facility with immediate effect to employees of 12 of the largest property companies in the Gulf including Nakheel and Emaar.

“In view of the current market scenario, it has been decided to suspend retail credit facilities to expatriate employees working with the [below] mentioned employers, due to possible restructuring, lay offs and job loss,” the email read.

“Branches/meSALES are advised not to grant retail facilities to the expatriate employees working with these organizations with immediate effect,” the email added.

It is understood the move by Emirates NBD will affect hundreds of expat staff working in the real estate industry in the emirate.

The email was sent on Nov 6 by Amal Al Serkal, the head of group retail credit at Emirates NBD.

In the memo, she said the bank would no longer provide credit to staff working at developers Tamweel, Amlak, Damac and its subsidiaries, Emaar, Nakheel, Sama Dubai, Dubai Properties, Union Properties and KM Properties.

Emirates is worried staff employed by these developers could default on their payments if the real estate sector continues to struggle and further job losses are announced.

Already, Dubai-based Damac has announced 200 job cuts while Omniyat Properties has also confirmed cutbacks, thought to be about 60.

And on Thursday, Emaar, the largest developer in the Middle East, said it was also reviewing its recruitment policy in light of the global financial situation.

Roy Cherry, real estate analyst at Dubai-based investment bank Shuaa Capital, said: “This won't send out a good signal and will fuel the negative sentiment on the equity markets.

"The banks are not only extending credit to the employees, they are also funding the companies - so they know very well the funding requirements and shortages of these companies.

“It seems they expect large scale lay-offs. The market sees this as a further indicator that things are snowballing.”

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READERS' COMMENTS

Emirates Bank decision
Posted by Greg, Abu Dhabi, UAE on Thursday 20 November 2008 at 07:30 UAE time


Today the Real Estate guys, tomorrow it could be any one of us. In reality no expat worker is really safe, even those in the banking sector who may be making these decisions.

As for me...I am going to invest in a bigger mattress to put my money under, just in case.

A tribute to a new advertising slogan
Posted by Doug, Dubai on Sunday 16 November 2008 at 09:22 UAE time


They said the the Gulf was immune from the recession.

We say: What next?

Emirates Bank knows something more than we do...
Posted by Raj, Dubai, UAE on Friday 14 November 2008 at 15:07 UAE time


Clearly Em Bank knows more than all know. Reading between the lines seems to confirm that R.E. Sector is gonna see worse days. Anyways i wish all best of luck.

They have victimised the entire socitey/economy
Posted by Shilu, Dubai, United Arab Emirates on Friday 14 November 2008 at 14:20 UAE time

These banks, as many has commented, are the one who have created the problem the fine lady in this story is trying to solve by stopping granting loans to developers employees. At one point of time they were extending credit in all forms to employees and the only guarantee that they stay on their jobs/or find jobs fairly quickly if they are terminated as long as they stay in the country. There was no basic rational behind how sales department extended credit to people, have a salary transferred to a bank account with them and here you go... you have a loan that the majority will not be able to settle even if they work 3 jobs for the next 10 years....Even worst in many cases they accept that you have a valid employment contract and just give them checks... no need to transfer salary to them.

The whole process was something worst than the food chain in oceans ecosystem... The bank push their sales staff to sell more and more... low salaries and big theoretical sales commission.... the poor sales employee shift to what is called aggressive successful sales man (i.e. some one who doesn't follow any logic and doesn't apply any commercial common sense) and start selling right left center credit (which is funded by other poor employees savings), he/she start sending wrong signals from the field about the urgent need to react to competition and stimulate demand by loosening credit standards... he/she achieve his quota which is something like a moving goal post in these sales organizations.... greed.. then you have the poor guy who took the loan, he feels good for only short time when he has the money, satisfy the short need for consumption.. then the whole miserable feeling start kicking in with the first payment he/she has to made from a salary that is losing buying power every day...thanks to the real estate sky rocketing costs/prices which spread across the entire economy like fire spreading in dry leaves.... then you have those people who have their savings in the bank, no credit exposure or exposure that is below their savings/income who will suffer at one point of time.. until the central bank comes in and use the country cash reserves to save these banks who are unable to pay or collect money.... so other sectors in the country will suffer beyond what it already suffer....

These banks have victimized the entire society by committing mistakes deliberately in the first instance and now they are committing another mistake by sending wrong signals to market.... and here you go... who wins? The big fish who owns the majority of the bank and have a prime stock...because by now many of these big fishes already exited their investments and cashed in the money. Typical US scenario at a smaller scale.

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